How to Pay an Indian Vendor From the US: ACH vs Fedwire vs SWIFT

The short answer

ACH and Fedwire are US-domestic rails. On their own, they can’t deliver money into an Indian bank account. To reach a bank in India directly, you send an international (SWIFT) wire, which works but often costs the most and arrives short. The alternative is to pay your vendor’s USD virtual account on a cross-border collections platform: you pay it by ACH or Fedwire like any US vendor, and the platform settles rupees into the vendor’s Indian bank account with the export paperwork they need.

Here’s the full breakdown.

First, the three US rails in plain terms

ACH (Automated Clearing House)

ACH is the batch network behind payroll, vendor payments and direct debits in the US. It’s low-cost (often free or a few dollars per payment on business accounts) and usually settles in one to two business days, with same-day options at many banks.

The catch: it’s designed to move money between US bank accounts using a routing number and an account number. There is an international ACH format, but it only works where a gateway connects the US network to the destination country’s payment system, and it isn’t something most US business banking offers as a routine way to pay an Indian account. In practice, an AP team can’t just enter an Indian account into an ACH payment.

Fedwire

Fedwire is the Federal Reserve’s real-time gross settlement system: what your bank uses for a “domestic wire.” Payments are individual, final, and typically arrive the same business day, often within hours. It costs more than ACH (a domestic wire fee on the sender side, and sometimes an incoming fee on the receiver side).

Like ACH, Fedwire moves dollars between US banks. It doesn’t deliver into an Indian bank account by itself.

SWIFT (international wire)

SWIFT is the messaging network banks use to send cross-border wires. When you choose “international wire” in your bank portal, you’re sending a SWIFT payment. It can reach the vendor’s Indian bank (an authorised dealer, or AD, bank, meaning one permitted by India’s central bank to handle foreign exchange) directly.

The money doesn’t always travel straight there. If your bank and the vendor’s bank don’t have a direct relationship, the payment passes through one or more correspondent (intermediary) banks, and each can take a fee along the way.

ACH vs Fedwire vs SWIFT vs a USD virtual account: side by side

Fees and timelines vary by bank and platform. Treat the cost lines as typical patterns, and check your own bank’s fee schedule before you rely on a number.

Who actually pays: payer-side vs vendor-side costs

This is the part that causes most of the friction between US AP teams and Indian vendors, so it’s worth getting exact.

On a SWIFT wire, you choose a charge option

• SHA (shared): the usual default. You pay your bank’s outgoing fee. Intermediary fees and the receiving bank’s charges come out of the amount in transit. Your vendor receives less than the invoice.
• OUR: you pay all charges upfront so the vendor should receive the full amount. Your fee is higher, and the vendor’s own bank may still apply a local charge or its conversion rate.
• BEN: all charges, including yours, come out of the payment. Rarely used for vendor payments because it shortchanges the vendor the most.

Then there’s currency conversion. If you send dollars, the vendor’s Indian bank converts them to rupees at its own rate, which is usually some distance from the mid-market rate. That gap doesn’t appear as a line item, but your vendor feels it.

The result is a familiar email thread: “We received $4,962 against a $5,000 invoice. Can you send the balance?” Now someone has to reconcile a short payment, decide who absorbs it, and possibly send a second wire with its own fee.

On a USD virtual account, costs are split cleanly

You pay exactly what you’d pay for any US vendor: an ACH (often free) or a domestic wire fee. The full invoice amount lands in the vendor’s USD account. Conversion and payout costs sit on the vendor’s side, at a rate and fee the platform discloses before they withdraw. No intermediary banks shaving the amount mid-route, and nothing for your team to chase.

A worked example: paying a $5,000 invoice

Illustrative figures only, to show how the money moves. Your actual bank fees and rates will differ.

Across a year of monthly invoices to several vendors, those deductions, second wires and reconciliation hours add up on both sides of the relationship.

Speed: what to promise your vendor

• ACH to a virtual account: usually one to two business days to land, faster with same-day ACH. Add the platform’s payout time to India.
• Fedwire to a virtual account: typically same day to land. Useful when an invoice is due tomorrow.
• SWIFT wire: commonly one to five business days. More intermediaries, cut-off times, time-zone gaps and compliance checks can all stretch it.

Whatever rail you use, send before your bank’s cut-off time and avoid the days around US and Indian bank holidays if a payment is time-sensitive.

Documentation: what each side needs

On your side (the US payer)

1. Form W-8BEN or W-8BEN-E. Collect it before the first payment. W-8BEN is for an individual freelancer; W-8BEN-E is for an Indian company or agency. It documents that the vendor is a foreign person.
2. No 1099 for work done entirely outside the US. Payments to a foreign vendor for services performed abroad generally don’t need a Form 1099 or US withholding. Without a valid W-8 on file, though, your systems may have to treat the vendor as a US person, which can trigger backup withholding. If the vendor ever performs work while physically in the US, the rules change, so loop in your tax advisor.
3. A proper invoice. Vendor’s legal name, address, a description of the services, amount and currency.
4. For SWIFT only: beneficiary name and address exactly as on the bank account, account number, the bank’s SWIFT/BIC and address. Some banks also ask for the Indian branch’s IFSC code. For a virtual account, you only need the US routing and account number the vendor gives you.
5. A clear payment description. Something like “Software development services, Invoice #1042.” It helps the vendor’s bank classify the payment correctly.

On your vendor’s side (in India)

This is worth understanding, because it’s why some Indian vendors will ask you to pay a particular way.

• Proof of foreign inward remittance. Indian service exporters need a FIRA or FIRC (a certificate from the bank or platform confirming foreign currency came in) to show their CA and tax authorities that the payment was a genuine export receipt.
• A purpose code. Every inward remittance into India is tagged with a code describing what it was for, such as P0802 for software consultancy or P0807 for other IT services. A clear payment description from you helps get this right.
• Export status for GST. For services to count as a zero-rated export (no GST charged on the invoice), the payment has to arrive in convertible foreign exchange, or through another channel India’s central bank permits, with that proof attached. A payment routed as a domestic rupee transfer can lose that treatment.

So when your vendor asks you to pay their USD account details rather than wiring rupees through some informal route, they’re not being difficult. They’re making sure the payment is documented as an export, which protects you both.

Which option should your team use?

• Use a SWIFT wire when a vendor only has an Indian bank account and nothing else, for one-off or occasional payments, or when your treasury policy requires paying the beneficiary’s bank directly. Consider the OUR charge option if you want the invoice to arrive close to whole.
• Use ACH or Fedwire to a USD virtual account when you pay Indian vendors regularly, want them treated like any other vendor in your AP system, and want invoices to arrive in full without correspondent-bank deductions.
• Don’t try ACH or Fedwire to an Indian account directly. The payment will either be rejected or never set up in the first place.

How Remit Circle fits

Remit Circle is built for Indian freelancers and software companies that bill clients abroad. Your vendor shares Remit Circle USD account details with you, your team pays them by ACH or Fedwire exactly as you’d pay a US supplier, and the funds settle into their Indian bank account through regulated channels, with a FIRA and the right purpose code handled for them. For your AP team, nothing changes except the invoice gets paid in full.