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Why do financial institutions charge so much to convert currency?
In my experience working at a currency exchange money service business in the US: Flat fees are the "because we can" fee on average. These can be waived on certain dollar values at some banks or MSBs, and sometimes can even be haggled.  If you Google EURUSD, as an example, you also get something like $1.19 at 4pm, 9/18/2017. If you look at the actual conversion that you got, you may find your bank hit you with $1.30 or something close to convert from USD to Euro (in other words, you payed 10% more USD per Euro). And, if you sell your Euro directly back, you might find you only make $1.07. This spread is the real "fee" and covers a number of things including risk or liquidity. You'll see that currencies with more volatility or less liquidity have a much wider spread. Some businesses even go as far as to artificially widen the spread for speculators (see IQD, VND, INR, etc.). Typically if you see a 3% surcharge on international ATM or POS transactions, that's the carrier such as Visa or Mastercard taking their cut for processing. Interestingly enough, you also typically get the carrier-set exchange rate overseas when using your card. In other words, your bank has a cash EURUSD of $1.30 but the conversion you get at the ATM is Visa's rate, hence the Visa fee (but it's typically a nicer spread, or it's sometimes the international spot rate depending on the circumstances, due to the overhead of electronic transactions). You also have to consider the ATM charging you a separate fee for it's own operation. In essence, the fees exist to pad every player involved except you. Some cards do you a solid by advertising $0 foreign exchange fees. Unfortunately these cards only insulate you from the processing/flat fees and you may still fall prey to the fee "hidden" in the spread. In the grander scheme of things, currency exchange is a retail operation. They try to make money on every step that requires them to expend a resource. If you pay 10% on a money transaction, this differs actually very little from the mark-up you pay on your groceries, which varies from 3-5% on dry food, to 20% on alcohol such as wine.