Australia report shows how banks gouge, and Fintechs may provide a better service, when it comes to International Money Transfers
Australia is a smaller market by population but it is also a country that has embraced Fintech innovation. The emerging Fintech sector is assisted by a supportive government that has recognized its important role in fostering change that is beneficial to both consumers and business.
Recently, the Australian Competition & Consumer Commission (ACCC) has published an interesting report on international money transfers (IMTs). Entitled, “Foreign Currency Conversion Services Inquiry,” the report is the genesis of a consultation seeking feedback from industry stakeholders.
In October 2018, the Australian treasurer approved the ACCC to hold an inquiry into the supply of foreign currency conversion services in Australia. As part of the inquiry, services such as; international money transfers, foreign cash services, payment cards (credit/debit) and pre-paid money card services were reviewed. Along with traditional providers, such as banks, multiple Fintechs were reviewed. The report revealed the total cost of these services which include fees plus actual exchange rates provided to consumers. In brief, the ACCC report showed how traditional finance gouges and Fintechs provide superior services when it comes to IMTs.
In Australia, an estimated AUD $21 billion in personal IMTs are sent from Australia each year. Additionally, the size of these transfers tend to be relatively larger. Similar to many other countries, IMTs are largely used by immigrants or temporary works, a segment of the population that is impacted to a larger degree by the cost of transfers.
The report states that pricing can be complex for users:
“The total price of the FX services is driven by two components: the retail exchange rate, which typically includes a retail margin or mark-up, and fees. Services that appear to be cheap when considering only fees or the retail exchange rate can turn out to be the most expensive option based on the total price. Some suppliers, possibly in recognition of consumers’ aversion to fees, do not charge an up-front transaction fee and instead earn revenue through the mark-up on the retail exchange rate. Services advertised as ‘no fee’ can give the illusion that the price is lower than it really is prices are presented in different ways. For example, some suppliers display the exchange rate and note that fees may apply. Others quantify the fees but leave the calculation of the currency conversion and total price to consumers prices lack transparency. Inquiry stakeholders noted that there was inadequate disclosure of prices by some suppliers and consumers have expressed concern that they do not always know what the total price for an FX service will be up-front. Our inability to easily collate complete price information from publicly available sources demonstrates how difficult it is for consumers to compare total prices.”
And how do the four big banks in Australia stack up? To be blunt, the traditional banks, they pretty much suck.
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