Payments Training Hub
Ten thousand dollar cross-border payment PAYMENT OPERATIONS STARTED LIVE 01 Ten thousand dollar cross-border payment - Consider a payment of ten ACTIVE 02 Total cost - sender is ten thousand dollars plus QUEUED 03 Supplier - receives ten thousand dollars less fifteen QUEUED 04 Supplier - five dollars, and the buyer will have QUEUED 05 BEN - sender pays exactly ten thousand dollars QUEUED Consider a payment of ten thousand US dollars from a company in India to a supplier in Germany Step 1 of 5 Ten thousand dollar cross-border payment STARTED Ten thousand dollar cross-border payment Consider a payment of ten thousand US ACTIVE Total cost sender is ten thousand dollars plus QUEUED Supplier receives ten thousand dollars less fifteen QUEUED Supplier five dollars, and the buyer will have QUEUED BEN sender pays exactly ten thousand dollars QUEUED Consider a payment of ten thousand US dollars from a company in India to a supplier in Germany
Total cost PAYMENT OPERATIONS IN PROGRESS LIVE 01 Ten thousand dollar cross-border payment - Consider a payment of ten DONE 02 Total cost - sender is ten thousand dollars plus ACTIVE 03 Supplier - receives ten thousand dollars less fifteen QUEUED 04 Supplier - five dollars, and the buyer will have QUEUED 05 BEN - sender pays exactly ten thousand dollars QUEUED The total cost to the sender is ten thousand dollars plus the charges Step 2 of 5 Total cost IN PROGRESS Ten thousand dollar cross-border payment Consider a payment of ten thousand US DONE Total cost sender is ten thousand dollars plus ACTIVE Supplier receives ten thousand dollars less fifteen QUEUED Supplier five dollars, and the buyer will have QUEUED BEN sender pays exactly ten thousand dollars QUEUED The total cost to the sender is ten thousand dollars plus the charges
Supplier: nine thousand nine hundred PAYMENT OPERATIONS IN PROGRESS LIVE 01 Ten thousand dollar cross-border payment - Consider a payment of ten DONE 02 Total cost - sender is ten thousand dollars plus DONE 03 Supplier - receives ten thousand dollars less fifteen ACTIVE 04 Supplier - five dollars, and the buyer will have QUEUED 05 BEN - sender pays exactly ten thousand dollars QUEUED The supplier receives ten thousand dollars less fifteen dollars less ten dollars, which is nine thousand nine hundred and seventy five dollars. Step 3 of 5 Supplier: nine thousand nine hundred IN PROGRESS Ten thousand dollar cross-border payment Consider a payment of ten thousand US DONE Total cost sender is ten thousand dollars plus DONE Supplier receives ten thousand dollars less fifteen ACTIVE Supplier five dollars, and the buyer will have QUEUED BEN sender pays exactly ten thousand dollars QUEUED The supplier receives ten thousand dollars less fifteen dollars less ten dollars, which is nine thousand nine hundred and seventy five dollars.
Supplier will ask for the missing twenty PAYMENT OPERATIONS IN PROGRESS LIVE 01 Ten thousand dollar cross-border payment - Consider a payment of ten DONE 02 Total cost - sender is ten thousand dollars plus DONE 03 Supplier - receives ten thousand dollars less fifteen DONE 04 Supplier - five dollars, and the buyer will have ACTIVE 05 BEN - sender pays exactly ten thousand dollars QUEUED The supplier will ask for the missing twenty five dollars, and the buyer will have to send a second payment, which will incur more charges. Step 4 of 5 Supplier will ask for the missing twenty IN PROGRESS Ten thousand dollar cross-border payment Consider a payment of ten thousand US DONE Total cost sender is ten thousand dollars plus DONE Supplier receives ten thousand dollars less fifteen DONE Supplier five dollars, and the buyer will have ACTIVE BEN sender pays exactly ten thousand dollars QUEUED The supplier will ask for the missing twenty five dollars, and the buyer will have to send a second payment, which will incur more charges.
BEN charges borne by beneficiary PAYMENT OPERATIONS COMPLETE LIVE 01 Ten thousand dollar cross-border payment - Consider a payment of ten DONE 02 Total cost - sender is ten thousand dollars plus DONE 03 Supplier - receives ten thousand dollars less fifteen DONE 04 Supplier - five dollars, and the buyer will have DONE 05 BEN - sender pays exactly ten thousand dollars ACTIVE The sender pays exactly ten thousand dollars, and the beneficiary bears all fifty dollars of charges. Step 5 of 5 BEN charges borne by beneficiary COMPLETE Ten thousand dollar cross-border payment Consider a payment of ten thousand US DONE Total cost sender is ten thousand dollars plus DONE Supplier receives ten thousand dollars less fifteen DONE Supplier five dollars, and the buyer will have DONE BEN sender pays exactly ten thousand dollars ACTIVE The sender pays exactly ten thousand dollars, and the beneficiary bears all fifty dollars of charges.

Key points of this lesson, in order.

0:00 / 2:31 Step 1 of 5

Worked examples: what the beneficiary actually receives

Charges, FX and gpi Tracking, Lesson 2 of 7, Narration 2:31, D06 Cross-border payments

What you will learn

Your objective. By the end of this lesson, you will be able to explain worked examples: what the beneficiary actually receives. Consider a payment of ten thousand US dollars from a company in India to a supplier in Germany, where the sending bank charges twenty five dollars, the intermediary bank charges fifteen dollars, and the receiving bank.

Why it matters. A business analyst who prepares a worked example like this for a customer or for a training session makes the abstract codes concrete, and the customer can then make an informed choice instead of discovering the deduction when the supplier complains.

Chapter objective: Learner calculates payment charges under BEN, OUR, and SHA, explains foreign exchange conversion and spread, and traces a payment using gpi status updates from initiation to credit. Learner practises this skill on realistic banking cases, explaining the reasoning clearly and using correct terminology throughout the work.

Key learning points

  • Ten thousand dollar cross-border payment
  • Total cost
  • Supplier: nine thousand nine hundred
  • Supplier will ask for the missing twenty
  • BEN charges borne by beneficiary

Key terms

Payment flow diagram showing Worked examples: what the beneficiary actually receives.

Practise this lesson

Exercise

Scenario: you are calculating what a beneficiary will receive. A customer sends USD 10,000 to a supplier in India. The sending bank charges USD 25. The correspondent bank charges USD 25. The beneficiary bank charges USD 15. Calculate what the beneficiary receives under OUR, SHA and BEN. Then calculate the total cost to the sender under each option, and advise the customer which option to choose if the supplier contract requires the supplier to receive exactly USD 10,000.

Amount sent: USD 10,000. Sending bank charge: USD 25. Correspondent bank charge: USD 25. Beneficiary bank charge: USD 15. OUR means the sender pays all charges. SHA means the sender pays the sending bank charges and the beneficiary pays the correspondent and beneficiary bank charges. BEN means the beneficiary pays all charges. The supplier contract requires the supplier to receive exactly USD 10,000.

  1. What to do. Calculate the beneficiary receipt and the total sender cost for OUR, SHA and BEN. Show the arithmetic for each. Then recommend an option and explain why.

Correct result. OUR: the beneficiary receives USD 10,000. The sender pays USD 10,000 plus USD 25 sending bank charge plus USD 25 correspondent charge plus USD 15 beneficiary bank charge, total USD 10,065. SHA: the beneficiary receives USD 10,000 minus USD 25 correspondent charge minus USD 15 beneficiary bank charge, total USD 9,960. The sender pays USD 10,000 plus USD 25 sending bank charge, total USD 10,025. BEN: the beneficiary receives USD 10,000 minus USD 25 sending bank charge minus USD 25 correspondent charge minus USD 15 beneficiary bank charge, total USD 9,935. The sender pays USD 10,000. Recommendation: use OUR, because the supplier contract requires the supplier to receive exactly USD 10,000, and only OUR guarantees that. The sender pays USD 10,065 in total, which is USD 40 more than SHA and USD 65 more than BEN, but the contract requirement is met. Worked reasoning: under SHA, the correspondent and beneficiary bank charges are deducted from the amount as it travels, so the beneficiary receives less. Under BEN, all three charges are deducted, so the beneficiary receives the least. Under OUR, the sender pays all charges separately, so the full amount reaches the beneficiary.

Why. Hint 1: work out who pays each of the three charges under each option, then subtract the beneficiary-paid charges from the amount. Hint 2: the total cost to the sender is the amount plus the sender-paid charges. Hint 3: if the contract requires an exact receipt, only OUR works. The worked explanation shows the arithmetic discipline: list each charge, assign it to sender or beneficiary under each option, then do the subtraction.

Check your understanding

Practice question

A customer sends a payment with charges marked SHA and complains that the beneficiary received less than expected. What does SHA mean, and what should the bank explain?

Takeaway and next step

What to remember

The key point is that the beneficiary receives the full ten thousand dollars.

Build a cross-border payment like the one in this lesson and watch the chain, the charges, and the final amount change.

Open the Cross-Border Payment Configurator →

Builds on "OUR, SHA and BEN: who pays the charges".

Transcript and full text

Show transcript

Consider a payment of USD 10,000 from a company in India to a supplier in Germany, where the sending bank charges USD 25, the correspondent bank charges USD 25, and the receiving bank charges USD 15. If the charge arrangement is OUR, the sender pays USD 25 to the sending bank, and the sending bank pays the correspondent and receiving banks, so the supplier receives exactly USD 10,000. The total cost to the sender is USD 10,000 plus USD 25 plus USD 25 plus USD 15, which is USD 10,065. The key point is that the beneficiary receives the full USD 10,000, and the invoice is settled in full. The sender's receipt should show the USD 10,000 payment, the three charges, and the total debit of USD 10,065, so that the sender can reconcile it against the invoice. If the same payment is sent with SHA, the sender pays the USD 25 charge of the sending bank, and the correspondent bank deducts USD 25 and the receiving bank deducts USD 15 from the amount in transit. The supplier receives USD 10,000 less USD 25 less USD 15, which is USD 9,960. The sender has paid USD 10,025 in total, and the supplier has received USD 9,960, so USD 65 has been paid in charges across the chain, and the supplier is USD 40 short of the invoice amount. This is why SHA is a problem when the invoice must be settled in full. The supplier will ask for the missing USD 40, and the buyer will have to send a second payment, which will incur more charges, and the second payment will itself be subject to SHA deductions. The sending bank deducts USD 25, the correspondent deducts USD 25, and the receiving bank deducts USD 15, so the supplier receives USD 10,000 less USD 65, which is USD 9,935. The sender pays exactly USD 10,000, and the beneficiary bears all USD 65 of charges. BEN is the cheapest arrangement for the sender and the most expensive for the beneficiary, and it is only fair when the beneficiary has agreed to it in advance, for example when the beneficiary has priced the charges into the fee it quoted. A business analyst who prepares a worked example like this for a customer or for a training session makes the abstract codes concrete, and the customer can then make an informed choice instead of discovering the deduction when the supplier complains. Now add foreign exchange to the example, because most cross border payments involve a conversion. The company in India holds rupees and must pay USD 10,000. The bank's exchange rate is 83.50 rupees per dollar, while the mid market rate is 83.00, so the spread is 0.50 rupees per dollar, which on USD 10,000 is 5,000 rupees, or about USD 60. The company pays 835,000 rupees for the dollars, plus the charges. If the company had used the mid market rate, it would have paid 830,000 rupees. The spread of 5,000 rupees is larger than the total transfer charges of USD 65, and it is the largest cost in the payment, yet it is the cost the customer is least likely to notice, because it is embedded in the rate rather than shown as a separate charge. The analyst must therefore show the customer the full cost, not just the transfer charges. The payment screen should show the amount to be sent, the exchange rate, the mid market rate for comparison, the spread in rupees, the transfer charges, and the total debit, all before the customer confirms. The confirmation screen should repeat that information, and the receipt should show it again, plus the UETR for tracking. If the payment is delayed or the amount changes, the customer must be informed. A customer who is told the full cost upfront and agrees to it will not complain. A customer who discovers the cost after the payment has gone will complain, and the complaint will be about the bank, not about the correspondent chain. There is a second worked example that every analyst should be able to do: the return. Suppose the USD 10,000 SHA payment above is returned because the beneficiary account is closed. The beneficiary bank returns USD 9,960, because that is what it received, and the correspondent bank deducts USD 25 from the return, so the sending bank receives USD 9,935, and the sending bank deducts its own USD 25 return fee, so the customer receives USD 9,910 back. The customer sent USD 10,025 and receives back USD 9,910, a loss of USD 115, plus the foreign exchange spread on the way out and possibly a second spread on the way back if the funds are converted back to rupees. The analyst must be able to explain that loss to the customer, and must have included the return charges in the product disclosure. The lesson for the analyst is that worked examples are not teaching aids, they are the specification. When a business analyst writes a requirement that says the beneficiary will receive the amount less charges, that requirement is meaningless until it is expressed as numbers. The analyst should write the worked example first, with the amount, the charges at each bank, the exchange rate, the spread, and the amount the beneficiary receives, and then write the requirement to match the example. The test pack should then verify the example end to end, from the payment screen to the beneficiary credit. A payment product that has never been tested with a worked example is a product that has never been tested at all.

Consider a payment of USD 10,000 from a company in India to a supplier in Germany, where the sending bank charges USD 25, the correspondent bank charges USD 25, and the receiving bank charges USD 15. If the charge arrangement is OUR, the sender pays USD 25 to the sending bank, and the sending bank pays the correspondent and receiving banks, so the supplier receives exactly USD 10,000. The total cost to the sender is USD 10,000 plus USD 25 plus USD 25 plus USD 15, which is USD 10,065. The key point is that the beneficiary receives the full USD 10,000, and the invoice is settled in full. The sender's receipt should show the USD 10,000 payment, the three charges, and the total debit of USD 10,065, so that the sender can reconcile it against the invoice.

If the same payment is sent with SHA, the sender pays the USD 25 charge of the sending bank, and the correspondent bank deducts USD 25 and the receiving bank deducts USD 15 from the amount in transit. The supplier receives USD 10,000 less USD 25 less USD 15, which is USD 9,960. The sender has paid USD 10,025 in total, and the supplier has received USD 9,960, so USD 65 has been paid in charges across the chain, and the supplier is USD 40 short of the invoice amount. This is why SHA is a problem when the invoice must be settled in full. The supplier will ask for the missing USD 40, and the buyer will have to send a second payment, which will incur more charges, and the second payment will itself be subject to SHA deductions.

The sending bank deducts USD 25, the correspondent deducts USD 25, and the receiving bank deducts USD 15, so the supplier receives USD 10,000 less USD 65, which is USD 9,935. The sender pays exactly USD 10,000, and the beneficiary bears all USD 65 of charges. BEN is the cheapest arrangement for the sender and the most expensive for the beneficiary, and it is only fair when the beneficiary has agreed to it in advance, for example when the beneficiary has priced the charges into the fee it quoted. A business analyst who prepares a worked example like this for a customer or for a training session makes the abstract codes concrete, and the customer can then make an informed choice instead of discovering the deduction when the supplier complains.

Now add foreign exchange to the example, because most cross border payments involve a conversion. The company in India holds rupees and must pay USD 10,000. The bank's exchange rate is 83.50 rupees per dollar, while the mid market rate is 83.00, so the spread is 0.50 rupees per dollar, which on USD 10,000 is 5,000 rupees, or about USD 60. The company pays 835,000 rupees for the dollars, plus the charges. If the company had used the mid market rate, it would have paid 830,000 rupees. The spread of 5,000 rupees is larger than the total transfer charges of USD 65, and it is the largest cost in the payment, yet it is the cost the customer is least likely to notice, because it is embedded in the rate rather than shown as a separate charge.

The analyst must therefore show the customer the full cost, not just the transfer charges. The payment screen should show the amount to be sent, the exchange rate, the mid market rate for comparison, the spread in rupees, the transfer charges, and the total debit, all before the customer confirms. The confirmation screen should repeat that information, and the receipt should show it again, plus the UETR for tracking. If the payment is delayed or the amount changes, the customer must be informed. A customer who is told the full cost upfront and agrees to it will not complain. A customer who discovers the cost after the payment has gone will complain, and the complaint will be about the bank, not about the correspondent chain.

There is a second worked example that every analyst should be able to do: the return. Suppose the USD 10,000 SHA payment above is returned because the beneficiary account is closed. The beneficiary bank returns USD 9,960, because that is what it received, and the correspondent bank deducts USD 25 from the return, so the sending bank receives USD 9,935, and the sending bank deducts its own USD 25 return fee, so the customer receives USD 9,910 back. The customer sent USD 10,025 and receives back USD 9,910, a loss of USD 115, plus the foreign exchange spread on the way out and possibly a second spread on the way back if the funds are converted back to rupees. The analyst must be able to explain that loss to the customer, and must have included the return charges in the product disclosure.

The lesson for the analyst is that worked examples are not teaching aids, they are the specification. When a business analyst writes a requirement that says the beneficiary will receive the amount less charges, that requirement is meaningless until it is expressed as numbers. The analyst should write the worked example first, with the amount, the charges at each bank, the exchange rate, the spread, and the amount the beneficiary receives, and then write the requirement to match the example. The test pack should then verify the example end to end, from the payment screen to the beneficiary credit. A payment product that has never been tested with a worked example is a product that has never been tested at all.

Full lesson text (all scenes)

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