Sending money to another country still costs far more than sending it across a city. The persistent gap comes from the physical and regulatory work at the receiving end.
The cost is not in the transfer
Moving a payment instruction between institutions is close to costless. What is expensive is everything that surrounds it.
The sender must be identified, the payment screened, currency acquired and the recipient paid in a form they can use. Each step has a real cost that does not shrink with the size of the transfer.
Because much of the cost is fixed, small transfers carry a proportionally heavy charge. This is why the same corridor looks cheap for large amounts and expensive for small ones.
Why the last mile dominates
Many recipients are paid in cash at an agent location rather than into a bank account. Maintaining that network means paying agents, holding cash on site and managing the risk that comes with it.
Agents must be supplied with physical currency, which requires transport and security in areas where banking infrastructure is thin. That cost is loaded onto the transfer.
Where recipients hold accounts and instant domestic payment systems exist, costs fall substantially. The spread of mobile money accounts has changed pricing more than any change in the transfer itself.
How thin currency markets add margin
Converting into a widely traded currency is cheap because many participants stand ready to trade it. Converting into a currency with few buyers is not.
The provider must either hold a balance in that currency in advance, tying up capital, or buy it at a wide spread. Either route costs money that appears in the exchange rate offered.
Where the currency is subject to controls, an additional layer applies. The official rate may not be the rate at which the provider can actually obtain funds.
Why compliance costs fall heavily on this business
Remittance providers serve many small customers making frequent cross-border payments, which is a profile that attracts close supervision. Identity checks and monitoring apply to each one.
Providers also depend on banks for access to the payment system, and some banks have withdrawn from serving this sector. Fewer available banking partners means less competition and higher prices.
Licensing requirements differ in every country a provider operates in and are revised regularly. Meeting them in dozens of markets is itself a significant fixed cost.
What has actually reduced prices
Transparency requirements obliging providers to show the total cost before sending have made comparison possible. Competition works only where the price is visible.
Digital origination removes the sending-side agent entirely, and account-to-account delivery removes the receiving one. Corridors where both apply are the cheapest available.
The corridors that remain expensive are those where cash delivery, thin currency markets and limited banking access all coincide. None of those is solved by faster technology alone.