Foreign currency costs continue to confuse Aussies
New research by YouGov commissioned by Wise, the money transfer firm, has revealed that an overwhelming majority of Aussies don’t understand what costs are involved with sending money abroad and remain confused despite an ACCC inquiry which set out to improve fee transparency.
A solid 82 percent of respondents are confused by foreign currency costs which are amongst the highest in the world.
Worse, Wise’s survey showed that a solid 64 percent of respondents do not know that banks and other financial institutions charge both an upfront fee and a markup to the exchange rate for processing overseas money transfers.
With one in two Aussies sending money overseas, Wise said the survey results are particularly alarming because banks continue to profit through opaque pricing in the form of undisclosed exchange rate markups stinging Aussies between five and six percent on every transaction.
This lack of transparency is a much bigger deal now as 47 percent of Australians now send money abroad compared with 37 percent before the competition watchdog’s inquiry began in 2017.
In 2019, the ACCC report found that consumers who used the big banks to send money overseas could have collectively saved about $150 million if they had used an international money transfer service instead.
The survey of 1,049 respondents showed that almost half (47 percent) of Australians still use banks, with Baby Boomers the generation most likely to use their lender.
Around 39 percent of Australians use an online money transfer service like Wise, with Millennials most likely to use this option.
About 30 percent of the population uses traditional providers like Western Union or MoneyGram, with Gen X the generation more likely to use these providers.
One in three Australians is unsure if institutions impose any fees or charges for processing overseas money transfers, while 3 percent think sending money overseas is free.
As for the banks, 65 percent said the banks don’t make it easy to understand the costs associated with sending money overseas.
Incredibly, 78 percent of those who send money abroad through banks said they had barely noticed any improvements in price transparency since the ACCC became involved.
Stubbornly high costs
Price comparison data collected over two years by Wise - as well as publicly available pricing from Westpac’s website - show that costs have remained stubbornly high for those using banks, largely due to the exchange rate markups. These are not required to be disclosed by providers as part of the ACCC’s best practice guidelines.
“Australians who use banks are bamboozled by foreign currency because it is still intentionally designed by the sector to be confusing and non-transparent,”said Tristan Dakin, head of Wise Australia.
“On the flip side, the survey showed 89 percent of Australians who use online money transfer services like Wise, are more likely than those who use a bank to say they fully understand the costs associated with transferring money overseas.”
Dakin has urged the anti-trust regulator to reformulate their best practice guidance, so all providers disclose exchange rate mark-ups as an upfront fee.
“This is the only way that Australians can see the true costs associated with foreign currency, make an accurate and informed choice and ultimately drive down the cost of cross-border payments.
"Anything less will result in Aussie consumers and businesses continuing to be unknowingly charged between five and six percent on every transaction.”