TransferWise urges government action to force transparent money transfer pricing, end bank ‘rip-offs’

Richard Branson-backed TransferWise says Australia needs laws to force transparent pricing of cross-border money transfers.

Labor’s Andrew Leigh has spoken out against the big banks’ opaque pricing of international money transfers. (AAP Image/Joel Carrett)

Global payments group TransferWise says the federal government must take “decisive action” to introduce laws forcing transparent pricing of cross-border money transfers, to ward against big banks overcharging by billions of dollars.

TransferWise Australia boss Tim Cameron said clear disclosure of exchange rate mark-ups and fees, via a total dollar cost to the consumer, was the only way Australians would stop paying up to 10 times too much to send money overseas.

“Asking banks, no matter where they are in the world, to self-regulate just doesn‘t work,” he added. “Australia is no different... Until the government chooses to take decisive action by introducing laws that require transparent pricing, Australians will continue to lose billions of dollars a year to non-transparent and detrimental forms of pricing.”

Mr Cameron’s comments follow Labor’s Andrew Leigh accusing the big banks of misleading consumers and “benefiting from confusion” in the pricing of transferring money overseas.

Dr Leigh, shadow assistant treasury minister, took aim at big bank chief executives over the issue at parliamentary committee hearings last month. He hit out at them for not disclosing the full cost of a transfer upfront.

In response, Westpac CEO Peter King said: “What we are seeking to do is to provide the fees and the exchange rate so that people can calculate it. But I take your point that it could be simplified.”

Commonwealth Bank CEO Matt Comyn said the bank was trying to provide “greater transparency”, and committed to revisiting the topic, as did National Australia Bank boss Ross McEwan.

Richard Branson-backed TransferWise has eight million customers globally and has built its business model around transparency. The company has a $US5bn ($7bn) valuation and highlights the Asia Pacific as its fastest growing region, even though Europe is the biggest contributor to revenue.

TransferWise has just cut transfer prices by 4 per cent to 23 per cent for consumers and businesses when they transfer funds from Australia to ten Asian countries.

One example canvassed by The Australian showed while CBA has a lower transfer fee than TransferWise to send $1,000 to India, because of the better exchange rate offered by the latter the recipient gets more using the global group.

The Reserve Bank and Australian Competition and Consumer Commission have separately expressed concerns about foreign exchange fees and mark-ups charged by the nation’s banks.

In a 2019 report the ACCC found consumers who used the big four banks to send international transfers in US dollars and British pounds during 2017–2018 would have collectively saved about $150m if they used lower-cost providers.

The ACCC’s recommendations included that money transfer providers take “necessary steps” to inform customers upfront of the total price, give access to online calculators, and that the government set up a working group to look at better access to the banking system for non banks.

The regulator also highlighted it was prepared to take enforcement action on funds transfer fees.

Mr Cameron said governments and regulators around the world were increasingly looking at foreign exchange transparency and how to lower money transfer costs.

“The UN Member States have pledged, in the Sustainable Development Goals, to reduce by 2030 the cost of transfers from an average of 7 per cent to less than 3 per cent, and to eliminate remittance corridors with costs higher than 5 per cent,” he added.

“In April 2020, the EU passed a new legislation... which requires banks and transfer providers to show the true cost of sending money abroad. This is a positive step.”

TransferWise last year partnered with Bendigo and Adelaide Bank-backed digital player Up to let consumers move money overseas ­directly from their transaction ­account. Last year also saw TransferWise launch a debit card in this market for shopping online through overseas retailers and using for international travel.

Globally, TransferWise posted 70 per cent revenue growth for the year ended March 31, while net profit printed at £21.3m ($38.9m).