‘It’s a rip-off’: TransferWise takes aim at overseas access charges

TransferWise says Australians are being ‘ripped off’ by paying $2.1 billion a year in fees to access credit and savings overseas.

Nicholas Lembo, TransferWise’s Australia country manager.

Sir Richard Branson-backed TransferWise says Australians are being “ripped off” by paying $2.1 billion a year in fees to access credit and savings overseas, as it accelerates a push to win 10 per cent local market share through debit cards and partnerships.

The Australian push by TransferWise — which is based in London and has a private valuation of about $US3.5bn ($5.18bn) — comes as Josh Frydenberg is expected in coming weeks to release a landmark report by the competition regulator on the foreign exchange market.

The Australian Competition & Consumer Commission last year started examining the pricing of currency conversion services in Australia to evaluate whether there were impediments to price competition.

“We know because of it (Australian bank dominance) people are being ripped off,” TransferWise’s local boss, Nicholas Lembo, told The Australian. “They (consumers and businesses) have been overcharged and underserviced for a long period of time.”

The World Bank last year found Australia was the third most expensive Group of 20 economy for consumers and small businesses to transfer money. In 2016, Australians sent about $8.8bn overseas.

TransferWise draws on analysis by Capital Economics that shows Australians paid $2.1bn in 2018 on overseas card transaction fees, card ownership fees, overseas ATM fees and exchange rate mark-ups when using Australian debit, or prepaid travel cards offshore.

It is today unveiling two debit cards, through Mastercard, that it says will pile competitive pressure on Australian banks and other money transfer providers. That is in addition to TransferWise’s launch several years ago of its multi-currency account in Australia. “We are bringing transparency to the sector and price pressure,” Mr Lembo said.

But the money transfer and foreign exchange market in Australia has attracted a string of global players and fintechs over the past five years. In June, London-based Revolut became the latest to join the rush, while Facebooks’s push into the financial services market and funds transfers is also being closely watched by regulators and the industry.

The big four banks are estimated to account for about 55 per cent of the Australian forex transaction market.

TransferWise cites analysis — undertaken by Alderson Consulting (Bristol) — that claims the company is up to 11 times cheaper than many Australian travel debit and prepaid cards.

It said an Australian consumer spending $1000 in New Zealand could be hit with costs of up to $46 with a bank-issued card, compared to TransferWise’s $2.40.

A family holidaying in Europe may lose $300 in fees when spending $5000, compared to TransferWise’s cost of $55.

But consumers will need to read the fine print as TransferWise does impose limits on some transaction activity, including withdrawal amounts at ATMs for its lowest band of charges. It also provides e-commerce protection for online purchases, although only up to $US200.

“It’s unfair that your bank punishes you simply for wanting to spend your own money abroad,” said Kristo Kaarmann, TransferWise’s CEO and co-founder.

The debit cards — which have already been released in other global markets — function through the Mastercard platform and garner interchange fees. In Australia, TransferWise banks with Macquarie but also has its own financial services licence.

Mr Lembo said TransferWise wanted to achieve a “faster trajectory” of growth in Australia than in the UK, where the company now has 15 per cent market share after launching in 2011.

“We would say within the next couple of years we would be aiming for upwards of 10 per cent market share,” Mr Lembo said.

That would reflect about a doubling of the company’s current market share, and eventually it hopes to hit 15 per cent in Aus­tralia.

TransferWise is also in talks with digital and incumbent banks in this market about partnerships that would allow other players to implement its technology.

Investors in TransferWise include growth investment firm Lead Edge, Lone Pine, Vitruvian, Merian Global Investors and Sir Richard. More than five million people globally use TransferWise.