CBA slashes transfer fees to South Pacific nations

The Commonwealth Bank has cut transaction fees charged to bank customers sending money to five countries in the South Pacific.

The CBA has cut transaction fees for five countries. Picture: NCA NewsWire/Bianca De Marchi

The Commonwealth Bank has cut transaction fees charged to bank customers sending money to five countries in the South Pacific – a signal it is taking the fight to remittance services, industry players say.

The bank cut its $6 fee to convert Australian dollar payments to five currencies in the South Pacific to nothing on Friday.

International Money Transfers of Australian dollars from Commonwealth Bank accounts into Fijian or Solomon Islands dollars, Papua New Guinean kina, Vanuatu vatu, or Change franc Pacifique, used in French Polynesia, New Caledonia and Wallis and Futuna, will now incur no fee.

Many of these countries have longstanding economic relationships with Australia, with significant migrant communities.

Many members of those communities remit earnings from Australia to their families back home in these countries.

World Bank data from 2020 finds 8.8 per cent of Vanuatu’s GDP is derived from remittances.

Fiji took in almost $300m in remittances from overseas communities in 2020.

The remittance space has been heating up in recent years, with the arrival of Wise, formerly known as Transferwise, to the Australian market in 2019.

Wise, which inked deals with Bendigo and Adelaide Bank-backed neobank Up to let consumers move money overseas from transaction accounts, is now seeking to muscle in on the South Pacific.

The region has largely missed out on many movements in the banking and finance space and remains one of the most expensive regions to transfer money into due to a lack of infrastructure.

Westpac offloaded most of its Pacific operations in 2015 but remains one of the biggest movers of funds earned in Australia back to the Pacific.

The bank cut its $6 fee to convert Australian dollar payments to five currencies in the South Pacific to zero on Friday. Picture: Mark Stewart

Industry watchers say CBA’s move to cut its fees may be an attempt to head off the arrival of Wise into the market.

But Wise spokeswoman Anhar Khanbhai said the bank’s move to cut fees amounted to “sneaky tactics” due to other ways the bank would recoup costs.

“Australia is one of the most expensive countries in the world to send money from in general, and when it comes to sending money to the Pacific Islands, it gets even more expensive due to a lack of banking infrastructure and literacy in what the true cost of sending money is,” Ms Khanbhai said.

“It’s disappointing to see that despite the ACCC inquiry into FX, banks are still continuing with their sneaky tactics and not being transparent with customers.”

Ms Khanbhai said CBA’s move to waive the upfront transfer fee was not equivalent to a cheaper transfer.

“The cost of the transfer is simply absorbed in the exchange rate spread charged by the bank, which is often unknown, or not understood by consumers, resulting in less money received at the other end,” she said.

“The only way to stop Australians losing millions in hidden fees is for the government to mandate full-fee transparency where the upfront cost of the transfer plus the mark-up on the exchange rate is displayed to the customer.”

CBA was contacted for comment.