SWIFT wire transfers are the legacy method for cross-border payments. They work, they're well-understood, and they're noticeably more expensive than the alternatives that have emerged over the last 10 years. Most companies still wire-transfer their first few contractor payments before switching.
How a SWIFT wire actually works
- Your US bank initiates a SWIFT message to the contractor's Indian bank.
- If your bank has no direct correspondent relationship with the Indian bank, an intermediate bank routes the wire.
- Each bank in the chain takes a fee — typical $25-50 your bank + $15-30 intermediate + $15-25 receiving bank.
- FX conversion happens at one of the banks — typically the receiving Indian bank at their day's USD-INR rate.
- Bank's FX margin is 1-3% above the RBI reference rate.
- Funds reach the contractor in 2-5 business days.
True cost of a $5,000 SWIFT wire
| Component | Amount |
|---|---|
| Your bank fee (sending) | $30-50 |
| Intermediate bank charges | $15-30 (sometimes 'OUR' field absorbs) |
| Receiving bank fee | $15-25 |
| FX margin (~2%) | $100 (on $5,000) |
| Total cost | ~$160-205 |
| Net received by contractor | ~$4,795 worth of INR |
Wise (TransferWise) — the standard alternative
Wise has become the default for small-to-medium cross-border payments to India. Same $5,000 payment via Wise:
| Component | Amount |
|---|---|
| Wise fee | ~$20-30 |
| FX margin (~0.4-0.6%) | ~$25 |
| Total cost | ~$45-55 |
| Net received by contractor | ~$4,945 worth of INR |
| Transit time | 1-2 days typically |
| FIRC issued | Yes (recently) |
On a single $5k payment, Wise saves ~$110-150 vs. SWIFT. Monthly contractor payments compound this.
Set up the right payment rail with your consultant
FastLegal's consultant helps US companies set up the most cost-effective payment rail for Indian contractor payments — Wise Business account, multi-currency wallet, or a treasury solution like Mercury or Rho. Saves $1-3k annually per contractor.
Other options — when each fits
- Payoneer — strong if contractor receives payments from multiple international clients; lets them pool. ~1-2% FX margin.
- Stripe Atlas international payments — clean if your company is already Stripe-native. ~1-2% FX margin.
- Mercury / Rho international wires — modern US banks with cheaper FX than legacy. ~0.5-1% margin.
- Multi-currency receivables (Wise Business, Revolut Business) — keep USD and pay out in INR when needed.
- Old-school SWIFT — only if your treasury operations can't accommodate alternatives.
What happens on the Indian side
Once foreign currency lands in the contractor's account:
- Bank converts to INR at their day's rate (margin included).
- Bank issues FIRC documenting the foreign-source remittance.
- Some banks credit INR; some allow holding USD in a separate FCY account (RFC for residents in some cases).
- Contractor reports the income on their ITR; foreign income may need to be disclosed in Schedule FA if relevant.
Operational tips
- Standardise on one rail — switching mid-relationship is annoying.
- Confirm with contractor which bank account / rail they prefer — some banks have lower receiving fees than others.
- Pay on a predictable cycle — contractor can plan; you stay on top.
- Send the exact amount per the invoice in USD; let the contractor's bank handle FX.
- Avoid payments through informal channels (Hawala, peer-to-peer crypto without proper KYC) — regulatory and tax risk for the contractor.
Frequently asked questions
Why do banks charge so much?+
Legacy correspondent-banking model. Each bank in the chain takes a fee. SWIFT itself is just messaging; the cost is the network of intermediaries.
Is Wise actually safe for business payments?+
Yes — fully licensed in major jurisdictions including UK FCA, US FinCEN. Used by hundreds of thousands of businesses. Verify limits and KYC fit your volume.
Do Indian contractors prefer USD or INR receipts?+
Depends on their preference. Most prefer INR for simplicity. Some senior contractors with significant foreign income hold USD in a Resident Foreign Currency (RFC) account.
Can we batch monthly payments into a single quarterly wire?+
Yes if the contractor agrees. Lower per-payment fees but they wait longer for cash. Most prefer monthly.
Stop reading circulars. Start running clean payroll.
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