The short answer
Money does not move between countries. Nothing leaves your bank and arrives at the other one. What happens is that a chain of institutions, each of which holds an account with the next, adjust balances in opposite directions until the net effect is that your bank owes less and the recipient’s bank owes more.
Every fee you are charged, every delay you experience, and every deduction you did not expect comes from the length and shape of that chain. Once you can see the chain, the fees stop being arbitrary.
Accounts banks hold with each other
Two banks that want to settle payments between them need a shared position. The standard arrangement is that Bank A opens an account at Bank B, denominated in Bank B’s currency.
From Bank A’s point of view that is a nostro account — “our account with you”. From Bank B’s point of view the same account is a vostro — “your account with us”. One account, two names, depending on which side of the ledger you are reading.
When Bank A needs to pay someone who banks with Bank B, it does not ship anything. It instructs Bank B to debit its nostro balance and credit the recipient. The instruction is a message. The settlement is a pair of ledger entries.
This is the whole mechanism. Everything else is a consequence of it.
What happens when there is no direct relationship
Banks cannot hold accounts with every other bank on earth — there are tens of thousands of institutions and each relationship carries capital, compliance and monitoring costs. So most pairs of banks have no direct link, and the payment has to route through intermediaries that do.
A transfer from a small Finnish bank to a small bank in a country with limited banking relationships might route like this:
Your bank (FI)
→ its EUR correspondent, a large European bank
→ that bank's USD correspondent in New York
→ a regional bank with local presence
→ recipient's bankEach hop is a bank with a nostro relationship to the next. Each hop is entitled to charge for the service. Each hop applies its own compliance screening, and each hop can hold the payment.
This is why cross-border transfers to well-connected corridors are cheap and fast, and transfers to poorly-connected ones are expensive and slow. The difference is not distance. It is how many balance sheets the instruction has to cross.
Where the deductions come from
When someone receives less than you sent, it is almost always one of four things.
The sending fee. Charged by your bank, disclosed up front, the one everybody sees.
The exchange-rate spread. The difference between the rate you were given and the interbank rate at that moment. This is usually the largest cost and it is the one presented as though it were not a cost at all. Why “no fees” transfers are not free covers this in detail.
Intermediary deductions. Each correspondent in the chain can take its cut from the payment amount as it passes. Your bank cannot always tell you in advance how many hops there will be or what each will charge, because it does not control the routing beyond the first one. This is the origin of the maddening experience of sending a precise amount and having an unpredictable one arrive.
The receiving fee. The recipient’s own bank charging them to credit an incoming international payment.
There is a standard field in payment instructions that governs who bears the
intermediary charges. OUR means the sender pays everything and the recipient
gets the full amount. BEN means the beneficiary absorbs all charges. SHA
means shared — sender pays their bank, recipient absorbs the rest — and SHA is
usually the default. If it matters that an exact amount arrives, OUR is the
option to ask for, and it costs more precisely because the bank is now absorbing
an unknown.
Why SEPA is different
Inside the Single Euro Payments Area, euro transfers do not work this way. SEPA replaced bilateral correspondent chains with a common scheme: shared rules, shared message formats, and clearing infrastructure that all participants reach.
The practical consequences are large. A euro transfer inside SEPA has no currency conversion, so no spread. Regulation requires that it be priced the same as an equivalent domestic transfer, which for most European retail customers means free or nearly so. There is no intermediary chain taking deductions, so the amount sent is the amount that arrives.
SEPA Instant goes further, settling in seconds rather than the next business day, and European rules have been pushing banks to offer it as standard rather than as a premium option.
The boundary of this benefit is exact and worth knowing: it applies to euro payments within the SEPA area. Send euro to a country outside SEPA, or send a non-euro currency anywhere, and you are back in correspondent banking with all of its costs.
Why your transfer is slow
Cross-border delays are rarely about processing time. The instruction itself moves in seconds. The delay comes from three things.
Cut-off times. Every bank has a daily deadline after which instructions queue for the next business day. Miss the cut-off on a Friday and nothing happens until Monday.
Settlement windows. Currencies settle through systems that operate on their home market’s business hours. A USD leg cannot settle when New York is closed. A payment crossing two currencies has to catch both windows.
Compliance screening. Every institution in the chain screens the payment against sanctions lists and its own risk rules. A name that resembles a listed entity generates an alert that a human has to clear. Most clear in hours. Some do not.
What to do with this
Count the hops before you assume the price is unfair. A transfer that costs €8 into a major corridor and €35 into a thin one is not price gouging; it is a longer chain. That does not make it good value — it makes it worth comparing providers who route differently.
Ask which rails a provider uses. Money-transfer operators are often cheaper than banks because they do not use correspondent chains at all. They hold funded accounts in both countries and pay out locally from the destination balance, rebalancing separately in bulk. Nothing crosses a border per transaction, which is why the cost can be a fraction of a wire. The trade-off is that you are now exposed to that operator’s solvency and safeguarding arrangements rather than to a bank’s — worth reading what happens to your data when a fintech shuts down alongside.
Use SEPA where SEPA applies. If both accounts are in the SEPA area and the currency is euro, any product charging you a cross-border rate is selling you something you do not need.
For a fixed arrival amount, specify who pays charges. Ask for OUR. Expect it
to cost more, and know why.