The true cost of remittance: fees, FX margins and hidden charges

Why the real cost of sending money abroad often lies in the small print.

A remittance is money sent, often across national borders, by ex-pat workers to support family or communities back home. The funds are typically used for basic daily needs but also for school fees, mortgages and standing charges.

It’s a $857 billion-dollar industry. That’s the estimated value of remittances sent worldwide in 2023, according to the Migration Data Portal. Remittances are a big number but also a big deal for individuals and economies

Migrant remittances are a lifeline for millions of families in low- to middle-income countries. They also bolster foreign exchange reserves and support economic stability in countries, where remittances exceed foreign investment and aid combined. But just because remittances important, it doesn’t mean they always work well.

Remittance costs

The cost of sending a remittance may include both a transaction fee and a currency exchange fee or mark-up. This significantly reduces the amount beneficiaries receive. So much so, the World Bank, UN and other organizations are concerned about the high cost of remittances.

The UN has a Sustainable Development Goal (SDG) to reduce the cost of migrant remittances to 3% or less by 2030 and eliminate transfer corridors where the cost is 5% or higher. Currently, the average cost to send a $200 remittance is more than double the SDG target, namely 6.49%, according to World Bank figures for Q1 2025.

Transaction fees

Transaction fees for remittances range from a few dollars to a percentage of the transfer amount. Various factors affect the transaction fee, for example:

• Servicer provider – Banks continue to be the costliest channel for sending remittances (with an average cost of 14.9%), followed by post offices (5.5%), money transfer operators (4.7%), and mobile operators (4.6%), based on World Bank figures for Q3 2025.
• Transfer corridor – Payments may take longer and cost more to process from/to certain sender and recipient countries. Factors such as civil or political disruptions, a lack of banking infrastructure, regulatory requirements and corruption could make some countries harder to reach and affect the cost of the transfer.
• Amount – Service providers have different business and pricing models. Some may charge a flat-rate fee irrespective of the transaction amount. Others operate tiered pricing. Or ad valorem pricing where fees are calculated as a percentage of the transaction amount.
• Speed – Senders may pay a premium for faster remittances. It depends on the service provider, transfer corridor and payment methods. If the sender and recipient are both in Europe, a SEPA bank transfer could arrive the same day or immediately. And banks are prohibited from charging any more for a cross-border payment in euro than for a domestic one.
• Payment method – Bank account transfers, debit and credit cards, cash and digital wallets are all examples of ways of sending remittances. Generally, digital options are cheaper than paying physical cash at an in-person location, due to the increased overheads associated with running a physical network.
• Channel – Mobile, internet, bank branch and money service operator agent locations (e.g. Western Union or MoneyGram) are all ways to initiate a remittance. Again, digital, self-service options are cheaper than in-person, staffed options.
• Collection method – Recipients can collect funds electronically into an account with a bank, mobile money or digital wallet operator. Or physically at agent locations which typically incur larger fees.

FX margins

Currency conversion occurs when the sender’s currency is converted into the local currency of the recipient.

Some operators add a mark-up or ‘margin’ to the mid-market exchange rate. Sometimes also known as the ‘interbank’ rate, the mid-market rate is the midpoint between the buy price and the sell price of a currency.

Adding a mark-up to the exchange rate could make the transfer more expensive, even if there’s no or only a low upfront transfer fee.

In fact, FX margins are one-third of the price of $200 remittances. And make up more than half the price of cross-border payments, the World Bank claims.

Hidden remittance fees

Hidden remittance fees are extra charges associated with international money transfers, making the true cost of sending money abroad higher than the advertised transfer fee. They potentially decrease the total amount the recipient receives.

Some examples include:

• Intermediary/correspondent banking fee – Even remittances that don’t involve a bank account at the customer level may rely on banks for the actual transfer of funds. Cross-border transfers pass through various banks (or ‘hops’), sometimes in long chains, before reaching the recipient. Each of these banks may deduct a handling fee from the transfer amount before it reaches its destination.
• Receiving bank charge – Even after the funds arrive, the receiving bank may charge a processing or inward remittance fee to deposit the funds into an account.
• Card cash advance fee – Some credit card providers may charge a fee for funding the transfer with a card. The interest on such cash advances is usually higher than for purchases, making it an expensive way to borrow money or access cash fast.

Is greater transparency the answer?

“Sending remittances is unnecessarily confusing,” writes the World Bank in a 2021 blog. “As a result, consumers are often overcharged.”

The article goes on to explain that despite improvements over the last decade, consumers still do not understand how much it costs to send money abroad.

Several variables make up prices. But consumers don’t always know or understand what these are. Nor are they able to compare providers to find the best deal.

The World Bank is pushing for the total cost of remittances to be disclosed in a single upfront amount.

It cites UK government research showing that once fully transparent, ‘total cost’ pricing was introduced, the proportion of first-time consumers choosing the best option doubled from 34% to 68%.

“The single most important factor leading to high remittance prices is a lack of transparency in the market,” according to the World Bank. At Inpay, we differ slightly.

Overcoming the correspondent banking problem

We believe that the single most important factor leading to high remittance prices is the international correspondent banking infrastructure. Specifically, how it works – or doesn’t – for customers today.

High fees, slow settlement, uncertainty and limited transparency are simply inherent to correspondent banking. It’s a natural consequence of banks linking their different domestic systems together to process international payments.

While transparency and ‘total cost’ pricing may help consumers make better like-for-like comparisons. The fundamental problem remains the underlying rails.

Newer payment companies, such as Inpay, have built their own global networks to side-step many of the problems of traditional bank-based cross-border payments.

• Cost – Inpay’s direct access to domestic clearing channels helps minimize fees normally charged by intermediaries in an international correspondent banking chain. This means payments arrive in full without deductions but also makes them cheaper.
• Coverage – Inpay provides the network you need. We open access to a resilient global network spanning 90+ countries that’s built to move money at speed.
• Complexity – Inpay controls the routing of payments across its network for maximum simplicity, speed and transaction success.