What is one of the main downsides of using a correspondent bank?

One of the main downsides of using a correspondent bank is the high processing fees for cross-border payments. Correspondent banks facilitate international transactions between financial institutions, and typically, they impose various fees which can accumulate significantly, particularly for smaller transactions. These fees are charged for their services in handling the transaction, including the security measures, compliance processes, and the actual transfer of funds. This can make the cost of sending money overseas quite high, impacting individuals and businesses alike.

Understanding this cost structure is essential for entities engaging in international payments, as it directly affects their financial outcomes. Businesses need to consider these fees when evaluating which channels to use for global transactions, as they can vary greatly depending on the banks involved in the correspondence and the nature of the transaction.