> "why are wire transfers so expensive in the US?"
Regulatory capture. There's a ton of financial incentive for the banks and processing networks to push credit. Instead of a simple processing fee that gets pushed to near-zero, they can get a percentage transaction fee from their monopoly network, possibly participation fees from the merchants, lock-in/network effect, they get to push credit debt to increase revenue from the purchaser, they can run 'promotions' and 'rewards' programs to stimulate use, etc.
Even before the overdraft racket had a light shined on it, banks and networks were pressuring merchants (through 'incentives') to shift transactions back to credit. They were raising debit processing and card fees in direct response to the revenue effects of consumers switching to debit. Lowering potential debit revenue by cleaning up overdraft nonsense just put the final nail in establishment incentives to support debit.
My impression from the banks I've worked with is that a wire is a one transaction per file affair, and that a single wire is as much effort as a 10k item ACH file.
My point is just that if there were profit in processing transactions as wire transfers, they'd have been streamlined/automated/replaced with a more-modern equivalent long ago.
There is. The banks mark up their costs. Wires were $7 at my bank 12 years ago, they're up to $25 now. Sounds like profit to me.
There are a ton of alternatives out there for transferring money. Wires are just one Fed product that happen to have a specific speed/security/limit/regulatory system.
Off the top of my head, if you want to move money, there's at least: ach, wire, image clearing, paper check clearing, image exchange, the atm network(s), the debit card network(s), the credit card network(s). That's leaving out paypal, western union, dwolla, and whoever else has started a money transfer business.
Almost every single one of those has different guarantees about timing, reversability, regulations, and transaction limits.
Wires happen to be a ca. 2 hour difficult to reverse (but possible) from /to banks connected to the FED. They're more expensive, probably on the order of $1 + staff overhead.
ACH is a roughly overnight to/from any bank connected to the fed, pretty easily reversible for 3-90 days. They're ~$.01/transaction at scale, and you can batch huge numbers of them into one file, so they scale. That's where most bill pay and direct deposits go, as well as a ton of other stuff.
Regulatory capture. There's a ton of financial incentive for the banks and processing networks to push credit. Instead of a simple processing fee that gets pushed to near-zero, they can get a percentage transaction fee from their monopoly network, possibly participation fees from the merchants, lock-in/network effect, they get to push credit debt to increase revenue from the purchaser, they can run 'promotions' and 'rewards' programs to stimulate use, etc.
Even before the overdraft racket had a light shined on it, banks and networks were pressuring merchants (through 'incentives') to shift transactions back to credit. They were raising debit processing and card fees in direct response to the revenue effects of consumers switching to debit. Lowering potential debit revenue by cleaning up overdraft nonsense just put the final nail in establishment incentives to support debit.