I've read this question:

Looking for cheap international bank to bank transfer in USD

and noticed several factual claims:

  • A "standard international wire transfer" costs $40 USD, a huge fee.
  • It's possible to send someone in a different country a "paper check" (the usual bank check you use domestically in your own country?) - but this is slow overall (~2 weeks).
  • You can send USDs from the US via xoom, but the fee is quite high unless you convert them to EUR, in which case it's much lower - even if the destination country doesn't have EUR as its local currency!
  • You can send USDs from the US to another country using RiaTransfer, at a low fee, but you're capped at 3,000 USD for some reason, plus - the recipient has to pickup the USDs physically, in cash.
  • I've just been to xe.com and HiFX's sites offering this services, and they wouln't give you price quotes before you register, as if it's some secret.

Now, if everything was consistently expensive, or consistently slow, or consistently limited, then maybe I would have been able to intuit the logic here (just maybe).

But it seems these services are like a whack-a-mole of gotchas. Why is that? What are the inherent limitations/costs of such a transfer?


  • This question about countries with reasonable bilateral relations and integrated into the global banking systems (e.g. not Canada to Iran or US to Cuba), and accounts on both ends have IBAN numbers.
  • If this question is too general, let's focus on transferring USD outside the USA, to a non-EU country - to be received either as USD, EUR or local currency.
  • The traditional 'Wire Transfer' cost is simply 'traditionally' high, and none of the precipitating banks has a reason to reduce it. The newer providers try to get into this protected market, but are in most countries stuck with following 19th-century banking laws, so they try to wiggle around and between them - which makes them offer those surprising and inconsistent policies and fee structures. – Aganju Dec 12 '18 at 16:49
  • @Aganju: If you can give an example of a problematic banking law, perhaps you could make your comment into an answer. – einpoklum Dec 12 '18 at 17:29
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    You probably want to check out transferwise, though there are limitations as well. – jcaron Dec 12 '18 at 17:50

First, consider that even domestic transfers used to be slow and expensive in most countries not so long ago (and they probably still are in a few places).

There has been some incentive to optimise those for a number of reasons:

  • cost reduction for banks: they do prefer fully automated fully electronic transfers to paper cheques that need to be processed more or less manually, scanned, etc.

  • competition: credit card companies have taken a relatively important share of payments due to the convenience of those payments (which seem to happen immediately, even if it's a bit more complex than that).

  • regulatory pressure: especially in the EU, where directives have forced banks to be able to handle bank transfers in 24 hours even though it used to take days before.

But domestic transfers use mostly national banking systems (exceptions in the EU again with SEPA). Those systems are optimised to handle huge numbers of transactions, in a single currency, with well known bank account number formats, a single set of laws and regulations.

As soon as you get out of that:

  • volumes drop significantly, especially if you consider each country pair
  • you're faced with multiple banking systems
  • you usually have the additional layer of the SWIFT network
  • bank account numbers are often not standardised, so there can be needs for manual processing (this is getting a lot better with the introduction of IBANs in many countries).
  • there could be specific regulations in either country (currency controls, reporting obligations, various additional checks)
  • banks don't have a relationship with all other banks. They often have to go through other banks (correspondent banks) or central banks, which need to be paid as well.

There's also the issue of currencies. Currency exchange is a complex thing, you need to buy currency when you need it, there may be complications (sometimes you need to go through a third currency). Add again regulatory restrictions.

It makes it a lot more of a "custom" product, so it often remains expensive and slow. Also, in many cases, banks want to keep a simple pricing structure, so even if transfers to some countries are much simpler/high volume than others, they have a tendency to apply the highest cost to all. And since those transactions are a lot less frequent, customers have a lot less incentive to switch banks just for a one-off payment here or there.

Now, in come the new players, ranging from Paypal (not so new nowadays) to Transferwise. They are often a lot less expensive, and usually a lot quicker, than banks. But there are limits to what they can do. Over the last couple of decades, there have been lots of additional checks all financial institutions and payment providers have to make (KYC, PEPs, etc.), in theory to fight financing of terrorism, in reality to fight money laundering and tax avoidance. There are limits on how much you can send before they check and double-check who you are, where the money is coming from, where it's going to...

They also need a license in both countries, be connected to the banking systems in those (if you money is in your account with them in the destination country but you can't get it out, it's of no use to you...).

A final note on paper cheques: if you send a national paper check to someone in a different country, that is going to cost them a huge amount (if their bank is even willing to accept the cheque).

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  • Added some comments clarifying we're dealing with a relatively "easy" case w.r.t. source and target, with IBANs and everything. Also, what is "a huge amount"? And - what is KYC and PEP (link perhaps)? – einpoklum Dec 12 '18 at 20:08
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    @einpoklum KYC is Know Your Customer: know (and verify) who he is, where his money comes from, where the money goes to, what for... PEPs are Politically Exposed Persons: politicians, executives of public companies, etc. If either the source or destination is one, then it opens a can of worms in terms of additional checks, reporting, etc. (because of possible corruption). And knowing if someone is a PEP in a country different from yours is not easy. – jcaron Dec 12 '18 at 22:20
  • @einpoklum Also consider fraud: customer deposits $10K on account. Asks for a wire transfer to somewhere far far away. A bit later, the $10K are found to be fraudulent (forged cheque, stolen credentials, whatever...), and the customer has disappeared. If the payment was domestic, bank would have ways to trace down the money and try to recover it. Now that it's gone halfway around the world... – jcaron Dec 12 '18 at 22:48

International money transfer is difficult because of a variety of operational variables. Obviously, currency differences, less obviously, jurisdictional parameters (local contract law, situs of the transaction, trade embargos, banking reporting treaties, etc.)

If you are in the USA and enter in to an agreement with Transfer Corp, to transmit 15,000 euros, which you will pay in dollars in the form of $18,000 USD to a recipient in Germany. Ignoring the obvious issues with holding multiple currencies. If your recipient claims to not have received the funds who is at fault? You, US Transfer Corp, German Transfer Corp? Is German Transfer Corp even the same company or is it a contractor? Do you sue US Transfer Corp? Does the recipient sue the German subsidiary that should have had the money? Is the German company even the same company or a contractor? Did you ever have an agreement with the remote company? Can the person in Germany sue you? How? Does any party need to report to a governing body? Who keeps track of that?

Then there's the very simple fact of supply and demand. If supply says X service costs $40, and demand accepts it, then it costs $40. It doesn't matter what it costs supply to provide the service, it matters that it can charge $40. I'm sure if supply could charge $50 it would. To some extent I'm sure it costs $40 because no one wants to get in to the weeds of the potential problems until there's enough money involved that the $40 fee isn't significant.

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  • Edited my answer to clarify that we can assume no embargoes, no currency difference (if that helps), and reasonable relations. – einpoklum Dec 12 '18 at 20:12
  • "Who is at fault?" <- Why does that have bearing on the fee? "Supply and demand" <- In 2018, 689 Billion USD were sent in remittances alone worldwide. So plenty of demand, enough to stimulate supply (and this is not a new phenomenon). – einpoklum Dec 12 '18 at 20:18
  • Business liability has a cost. Then according to you $40 is a fair and proper price. The process is 'weird' because it's not always the same; and not comparable to other kinds of single jurisdiction transactions you may enter in to. – quid Dec 12 '18 at 20:26
  • The cost is if you want to resolve those issues and for Transfer Corp US to take on the same liability as for a domestic transfer. If you don't, then no extra cost. Also, if we're not talking about personal cash pickup, the fraction of transaction mishaps should be minuscule, and when it occurs, it will hurt a huge number of people so it's not a personal problem. – einpoklum Dec 12 '18 at 20:31
  • You asked why is the process weird. I understand that you think the internet shrunk the world and everything should be easy. Transacting business in multiple jurisdiction has costs and hurdles, when those jurisdictions span countries and governments the costs and hurdles grow. So, no, it is not the same liability because it's not the same operating conditions. The same way shipping a box from Los Angeles to San Francisco is different than CA to WA is different than USA to Canada and different again from USA to Zimbabwe. – quid Dec 12 '18 at 20:37

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