OUR, BEN, and SHA.

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Banking terms are confusing and complex. What makes it worse? 

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Acronyms that are associated with these banking terms. 

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In this blog post, we break down one such acronym - SHA in banking. 

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How is it related to international business remittance? What is it used for? Is it related to taxes? 

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Let’s dive into it! 

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#1 Who pays for wire transfer fees?

In the context of business international remittances, the responsibility for wire transfer fees depends on the selected payment instruction: SHA, OUR, or BEN. Here’s an explanation of each option:

1. SHA (Shared)

Responsibilities:

• The person sending the money pays their bank's fees to start the transfer.
• The person receiving the money pays their bank's fees for getting the transfer.

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2. OUR (Sender Pays All)

• Responsibilities:some text
  • The sender pays all fees, including those from both the sender's and recipient's banks.
  • The recipient receives the full amount without deductions.

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3. BEN (Recipient Pays All)

• Responsibilities:some text
  • The sender only transfers the amount and does not pay any additional fees.
  • The recipient covers all fees, which are deducted from the transfer amount.

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#2 What does SHA stand for in banking?

In banking, the acronym "SHA" refers to a shared cost approach for international wire transfers. In this arrangement, the sender is obligated to pay the fees charged by their bank, while the recipient is responsible for covering the fees charged by their bank.

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Example:

An Indian company, "Tech Solutions Pvt. Ltd.," sends $10,000 to a U.S. supplier, "Tech Gear Inc.," using SHA:

• Sender's Bank Fees: ₹2,500
• Recipient's Bank Fees: $50
• Amount Received by Recipient: $9,950

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#3  What is the SHA charge option?

The SHA charge option in international wire transfers splits transaction fees between the sender and the recipient. Specifically:

The sender covers the fees imposed by their bank for initiating the transfer.

The recipient covers the fees imposed by their bank for receiving the transfer.

This arrangement ensures that both parties contribute to covering the costs associated with the transaction, providing a fair approach to managing international remittance fees.

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#4 What is the meaning of SHA in SWIFT?

In the context of SWIFT (Society for Worldwide Interbank Financial Telecommunication) international payments, "SHA" stands for "shared." It is a specific type of payment instruction used to indicate how the costs of the transaction will be allocated between the sender and the recipient. 

Shared Costs:

• SHA instruction splits transaction fees between sender and recipient.
• Sender pays fees charged by their bank to initiate transfers.
• Recipient pays fees charged by their bank to receive transfers.

Fee Breakdown:

• Sender’s Bank Fees: Deducted from the sender’s account when the transfer is initiated. Covers processing and sending costs.
• Recipient’s Bank Fees: Deducted from the transferred amount or recipient’s account upon arrival. Covers receiving and processing costs at the recipient’s bank.

Transaction Flow:

• The sender initiates a SWIFT transfer with the SHA option, paying the bank’s fees upfront.
• SWIFT network securely transmits payment instructions and funds internationally.

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#5 Why use SHA in banking?

1. Fair Cost Distribution:
   • The SHA option ensures that both the sender and the recipient share the transaction costs, making it fair for both parties.
2. Transparency:
   • Each party is aware of and responsible for their respective fees, promoting transparency in international transactions.
3. Common Usage:
   • SHA is a commonly used payment instruction in international business transactions, as it provides a balanced approach to handling fees.

Comparison with Other Options:

• OUR: 
  • The sender pays all the fees, including those of both the sender’s and recipient’s banks. The recipient receives the full amount without any deductions.
• BEN:
  • The recipient pays all the fees. The fees charged by both banks are deducted from the transferred amount, so the recipient gets the net amount after all deductions.

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SHA Payment Method/Example Scenario:

Imagine an Indian company, "Tech Solutions Pvt. Ltd.," needs to send $10,000 to a supplier, "Tech Gear Inc.," in the United States:

1. Initiation:
   • Tech Solutions Pvt. Ltd. initiates the transfer through their bank in India, choosing the SHA option.
2. Sender’s Fees:
   • Tech Solutions Pvt. Ltd. pays their bank a fee of ₹2,500 for processing the transfer. This fee is covered by the sender.
3. Transfer Process:
   • The $10,000 is sent through the SWIFT network to Tech Gear Inc.’s bank in the U.S.
4. Recipient’s Fees:
   • Tech Gear Inc.’s bank charges a fee of $50 for receiving the funds. This fee is deducted directly from the transferred amount.
5. Final Amount Received:
   • Tech Gear Inc. receives $9,950 ($10,000 minus the $50 fee).