Can a Finance Company Act as a Remitting Bank?

In documentary collections, banks usually handle the remittance of funds and documents — but does it have to be a bank? What if a finance company steps in to manage the process? Let’s look at how a finance company can act as a remitting bank and how payment can still flow smoothly, even without its own nostro account.

Question

Dear Mr. Old Man,

I have two questions that need your opinion.

1. Can a finance company act as a remitting bank under a documentary collection transaction?
2. Can a collecting bank remit payment using MT103, considering that a finance company normally does not maintain a nostro account?

Thank you.

Yao Zu

______

Answer

Dear Yao Zu,

Thank you for your questions. Here’s my response.

Yes, a finance company can act as a remitting bank under a documentary collection transaction. It is more convenient if the company maintains SWIFT relationships with the collecting bank, but that is not a strict requirement. Even without a direct SWIFT connection, the finance company may still perform the role through correspondence or intermediary arrangements.

As for settlement, this is somewhat similar to cases where an exporter sends documents directly to a collecting bank and receives payment through normal SWIFT channels — except that, in this case, the collecting bank remits the funds to the finance company as the remitting entity, which then settles with the exporter after deducting any agreed fees or charges.

If the finance company does not maintain its own nostro account, the collecting bank can still route the funds through a correspondent or intermediary bank, ensuring payment is made as instructed.

In short:

A finance company without its own SWIFT or nostro setup can still participate effectively in a collection transaction — provided that proper correspondent arrangements and clear payment instructions are in place.

Best regards,

Mr. Old Man