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The money isn't destined for Swiss bank accounts or the Bahamas. It's being sent back mostly to family members left behind by the one in every four Australians who was born overseas, but some of it vanishes in lousy exchange rates and fees, with the big banks the worst offenders. In fact, you will get a better deal at the local 7-Eleven.

The World Bank says Australians transferred $17 billion overseas in 2012, which, using the 11 per cent increase in that year, would have grown to just over $20 billion a year. Luckily, this has spawned an industry specialising in international money transfers, which has slashed costs.

The easiest and cheapest way to move money overseas is online, although it can also be done on the phone or by paying cash to agents usually located in convenience stores.

"It can be three times cheaper to transfer money overseas through a broker, compared with a bank," says comparison website finder.com.au spokeswoman Michelle Hutchison.

The banks add a margin – in effect a secret commission – of up to 5 per cent to the exchange rate they use between each other, while brokers add less than 3 per cent. Banks also add a fee of about $30, whereas some brokers charge no commission.

On the day Money checked the quotes on finder.com.au, the cheapest transfer provider was CurrencyFair. It had the best exchange rate and a low fee of $4. Sending $5000 to the United States would have finished up as $US3882. That was $US80 better than the worst quote, which was from a commission-free broker. The result from a bank would have been even worse. The recipient would have been lucky to get $US3700.

CurrencyFair pioneered what chief executive Brett Meyers calls a currency marketplace. It's an exchange-rate version of eBay, bypassing the banks' slower (despite the acronym of SWIFT) and more expensive telegraphic transfers.

Buyers and sellers place their bids at currencyfair.com, just like the sharemarket, and you take what's there or wait, but unlike an online broker, if your currency isn't available at a good rate, CurrencyFair will step in.

"If there's no match, we supply the liquidity," Meyers says.

It charges a 0.4 to 0.5 per cent margin on the inter-bank exchange rate, well below the 5 per cent local banks might charge or 3 per cent foreign banks charge, but if you're lucky, the margin can be as low as 0.15 per cent. The only downside is that if CurrencyFair has to supply the currency, you won't know the exchange rate until you see the money at the other end, although the rate will probably still be a lot better than a bank's.

"The margin at two major banks was 5 to 5.5 per cent," Meyers says, when he compared his own quote.

Although CurrencyFair avoids the banks' international transfer system, the recipient at the other end still needs to have a bank account, or at least access to one, since it doesn't supply cash.

Traditionally, money transfers outside the banks were the domain of Western Union, but its quote was beaten by all the offerings on finder.com.au and by as much as $118. Still, it lets you use a credit card to transfer funds online, which makes it more convenient, although you would probably have to pay interest on a cash advance. Then again, PayPal will do that too.

Daryll Bumanlag bought a unit in the Philippines to support his mother, but after trying a bank, shifted to MoneyGram, which had an agent at a 7-Eleven shop across the road.

"They did an $8 promotion for Filipinos and it's much better. It only tales 10 minutes to transfer money into pesos, and sometimes mum needs it right away, " he says.

"The exchange rate is fair. I send her the reference number, then mum picks up the money at the bank. She just has to show some ID and confirm how much was sent."

Half the money sent overseas goes to just five countries: Britain, China, India, Lebanon and Vietnam. Surprisingly, Greece, which could do with the money, isn't among them.

ACTION PLAN 

• International money transfers can be done online or by phone.
• Banks and brokers add a margin to the interbank exchange rate.
• Check both the exchange rate and fee when sending money overseas.
• Banks charge the most to send funds overseas, but are the most secure.
• Brokers are faster than banks, with some transferring money within 10 minutes.
• Comparison website finder.com.au updates broker quotes daily.