How to avoid hidden fees on international transfers

What counts as a hidden fee on international transfers

A hidden fee is any cost that reduces the amount the recipient collects but is not clearly presented to the sender before they commit. Hidden costs are not always dishonest in a legal sense, but they can be deeply misleading. When a provider advertises 'no transfer fees' it is possible that no flat fee is charged, yet the sender still loses several percent of the transfer value through the exchange rate the provider applies.

There are three broad categories. First, the exchange rate markup: the provider uses a rate less favourable than the mid-market rate (the midpoint between the buy and sell prices on global currency markets) and pockets the difference. Second, fixed or percentage-based transaction fees, which may be shown before payment but are often buried in small print or displayed in the destination currency rather than pounds. Third, downstream fees charged by correspondent banks or the recipient's own bank, deducted mid-flight or on arrival and rarely disclosed upfront.

The FCA's May 2025 review criticised firms that failed to disclose intermediary or recipient bank fees before a transfer, buried pricing so it required excessive scrolling or multiple clicks, and did not communicate that an exchange rate markup is a real cost to the customer. Understanding these three categories is the starting point for comparing providers on a like-for-like basis.

The exchange rate markup: the biggest hidden cost most people miss

Exchange rate markups are responsible for the largest share of hidden costs in international transfers. When you ask your bank to convert pounds to euros or dollars, it does not always give you the mid-market rate quoted on financial news sites or Google. Instead it can apply its own rate, worse than mid-market, and retain the difference as revenue. Because the cost is folded into a number rather than presented as a fee, many consumers do not realise they are paying it.

Research published by Wise in February 2024 analysed the pricing of major UK banks sending GBP to EUR and USD. It found that HSBC applied the highest hidden markup among the banks reviewed at 3.7 percent, followed by Lloyds at 3.6 percent and Barclays at 2.75 percent, with several others such as NatWest, Santander and TSB at around 2.5 percent. By contrast, Monzo and Starling were rated as transparent because they use the mid-market rate. This is Wise's own research, and Wise is a commercial competitor to the banks it assessed, so it should be read as advocacy analysis rather than an independent study, though the individual markup figures are drawn from each bank's published rates.

The impact is significant. On a transfer of GBP 1,000 a 3.5 percent markup costs GBP 35 on top of any flat fee; on GBP 10,000 it costs GBP 350. Over a year of regular supplier payments that compounds into a real drag on cash flow. The single most powerful action any sender can take is to compare the mid-market rate with the rate actually offered and calculate the difference in pounds, not percentages, using the 'recipient gets' figure rather than the 'fee charged' figure as the benchmark.

Correspondent bank fees and how SWIFT routes add cost

When a payment travels across borders through the SWIFT network it does not always move in a straight line from your bank to the recipient's bank. Many currencies and country pairs require the payment to pass through one or more correspondent banks, each of which may deduct a fee before passing the funds onwards. These intermediate deductions are commonly called correspondent or intermediary bank fees.

According to Wise's own guidance, each correspondent bank can charge anywhere between 15 and 50 US dollars, or the equivalent, and the fee may be higher depending on the banks involved. A transfer that passes through more than one correspondent bank could therefore lose tens of pounds in mid-flight deductions alone. The sender often has no way of knowing in advance how many banks will be involved, because the routing depends on relationships between institutions that change over time.

The SWIFT fee instruction chosen at transfer time determines who absorbs these costs. The SHA (shared) instruction, the global default, means the sender pays their own bank's outgoing fee and the recipient absorbs the correspondent and receiving bank fees. Under OUR the sender commits to covering all costs including intermediate fees, though some banks do not guarantee full coverage of downstream deductions. BEN passes all fees to the recipient. Most consumers never see this option and proceed on the SHA default without realising the recipient will receive less than the amount shown on the confirmation screen.

One of the strongest arguments for payment rails that bypass the SWIFT correspondent chain, such as local network transfers or dedicated payment platforms, is that they can eliminate correspondent bank hops altogether. Providers that use local bank accounts in the destination country can credit the recipient directly.

Why corridor and destination matter: cost varies dramatically by route

Not all transfer corridors carry the same cost, and the variation is striking. In Q3 2025 the cost of sending money to South Asia averaged 5.30 percent and to the Middle East, North Africa, Afghanistan and Pakistan region 5.11 percent, the two cheapest receiving regions. Sub-Saharan Africa remained the most expensive receiving region at 8.46 percent, according to Remittance Prices Worldwide Issue 54.

UK-specific data tells the same story. The Migration Observatory at the University of Oxford, in its March 2025 briefing, found that the average cost of sending remittances from the UK was around 6 percent in the first half of 2024. Pakistan and India were the cheapest destinations, with average costs below the United Nations Sustainable Development Goal target of 3 percent. The range is stark: it cost less than 1 percent to send GBP 120 from the UK to Pakistan by bank transfer in the second quarter of 2024, while sending the same amount to Lebanon in cash cost around 17 percent.

The difference reflects how many correspondent banks serve the corridor, whether the destination currency is freely tradable, local receiving bank infrastructure, compliance costs and the level of competition among providers. High-competition corridors tend to be cheaper because providers undercut each other; low-competition corridors remain expensive because few providers have built local infrastructure. For a business paying regular suppliers in one country, the corridor cost matters more than a provider's lowest headline fee across all destinations. Cash also remains expensive: the Migration Observatory found that sending remittances in cash cost around 9.6 percent in the second quarter of 2024, almost twice as much as bank transfers. Shifting from cash to digital methods is one of the fastest ways to cut costs.

How to compare providers on total cost, not just headline fees

The only reliable way to compare providers is to use the total amount the recipient will receive, not the fee the sender pays. Two providers may charge identical flat fees but differ by two percent on the exchange rate, producing a material difference in what arrives. MoneySavingExpert maintains a regularly updated guide to specialist currency transfer firms and advises that online specialists almost always have better rates than high-street banks, while tools such as Monito show live comparisons for specific amounts and corridors, factoring in both fees and markups.

When evaluating a provider, ask four questions before you confirm: What exchange rate is being applied and how does it compare to today's mid-market rate? Are there any flat fees, and are they shown in pounds? Will correspondent or receiving bank fees be deducted and, if so, by how much? Is the amount the recipient will receive guaranteed or an estimate? A provider that answers all four clearly and upfront is demonstrating the transparency the FCA expects under Consumer Duty. For businesses making regular payments, a multi-currency account or dedicated payments platform may beat ad-hoc retail transfers, letting you hold balances in the destination currency and pay from them when the rate is favourable rather than converting on every payment.

What the FCA expects from payment providers under Consumer Duty

The FCA's Consumer Duty, which came into force for open products and services on 31 July 2023, requires payment firms to deliver good outcomes for retail customers. On 1 May 2025 the FCA published a specific review of international payment pricing transparency, finding gaps between what the rules require and what firms were actually doing. Firms that persist with poor disclosure risk supervisory attention.

Good practices identified by the FCA included displaying all transaction costs, including fixed fees and any exchange rate markup, before the customer commits; proactively informing customers about potential intermediary and recipient bank fees that may reduce the final amount; making pricing easy to find rather than burying it; and expressing fees in pounds sterling for UK customers. Where a conversion rate includes a markup, the FCA expects that markup to be communicated as a cost to the consumer.

Poor practices included highlighting the absence of a fixed fee as a 'zero cost transaction' while still applying an exchange rate markup; failing to explain the difference between the firm's rate and a reference rate; and not disclosing that intermediary banks might deduct fees mid-transfer. The takeaway is clear: if a pricing page does not tell you the exact exchange rate being applied and the exact amount the recipient will receive before you click confirm, that provider is not meeting the FCA's expectations.

Note the scope of this review. Consumer Duty and this transparency guidance apply to retail customers, so the strongest protections sit with individual consumers rather than corporate clients. That said, the principle of clear, fair and non-misleading pricing is a sensible benchmark for any sender. If your provider cannot explain its exchange rate policy or itemise all fees, that is a signal to seek an alternative regulated provider.

Practical steps to cut the true cost of international transfers

The most impactful step is to stop defaulting to a high-street bank for cross-border payments and switch to a specialist provider or business payment platform. World Bank data shows banks at 14.99 percent in Q3 2025 against 3.54 percent for digital-only money transfer operators on the same measure, so for large or frequent transfers the annual saving can be substantial. Always compare on the 'amount received' figure rather than the 'fee charged' figure, and treat any provider that will not show the exchange rate or recipient amount before payment as a red flag.

If you are sending large amounts, consider timing. Exchange rates move continuously and a small shift in the mid-market rate can outweigh a difference in provider fees. Some platforms offer rate alerts and forward contracts that let you lock in a rate today for a payment weeks or months ahead, which for businesses with predictable foreign currency obligations can remove exchange rate risk entirely.

Finally, check whether your provider offers a local transfer rail for the destination country. Payments that travel through domestic clearing systems rather than the SWIFT correspondent chain tend to arrive faster and cheaper because they avoid intermediate hops. Platforms such as Nasara Pay use local payment infrastructure where available to reduce both fees and settlement times. And do not rely on the OUR SWIFT instruction as a guaranteed fix: even when you select it, some correspondent banks do not honour it and may still deduct fees before the funds arrive.

Conclusion

Hidden fees on international transfers are a solvable problem, but solving it requires looking beyond the flat fee to the exchange rate markup, the correspondent bank deductions and the receiving institution's own charges. The World Bank's Q3 2025 data shows that switching from a bank to a digital-only transfer service can reduce costs from 14.99 percent to 3.54 percent on the same measure, and the FCA's Consumer Duty review has put providers on notice that opaque pricing is not acceptable.

The practical toolkit is straightforward: always compare on the total amount received, use independent comparison platforms, understand your corridor's typical cost, and ask your provider to show you the exchange rate before you commit. With the right provider and a few minutes of comparison, hidden fees become visible and avoidable.

Frequently asked questions