There are a number of cost components to making and receiving international payments, most of which are far from transparent to customers:
Currency conversion rates : Banks charge huge margins for currency conversion to the majority of businesses and individuals. They tend to fix rates once a day and therefore need to incorporate enough margin to protect against intraday rate volatility.
In addition, the level of price discrimination is extortionate – they get away with it because they can; businesses and consumers have been kept apathetic to using better alternatives.
Correspondent bank fees : These relate to the network of banking relationships that are utilised to complete an international transfer. Each correspondent bank skims a fee of the transferred amount for simply acting as link in the payment chain.
Customers are rarely made aware in advance as to how many correspondent banks are in the chain and what they will charge.