Invest
Foreign currency a cash cow for the big 4
Confusing pricing and a lack of “robust” competition means Australians sending or spending money overseas are paying far more for foreign currency conversion services than is needed.
Foreign currency a cash cow for the big 4
Confusing pricing and a lack of “robust” competition means Australians sending or spending money overseas are paying far more for foreign currency conversion services than is needed.
The final report from the Australian Competition and Consumer Commission’s (ACCC) foreign currency conversion services inquiry found a number of issues affecting people who use international money transfers (IMTs), foreign cash, travel cards and credit cards or debit cards for transactions in foreign currencies.
Most scathingly, the ACCC blasted the sustained use of the big four banks for foreign currency conversion services due to some of the challenges facing consumers, despite the availability of much cheaper alternatives.
It is difficult for consumers to compare prices because some suppliers don’t disclose their total price upfront, it was reported, with consumers sometimes also paying unexpected fees.
According to the ACCC, during 2017-18, individual consumers using the big four to conduct IMTs in US dollars and British pounds alone could have collectively saved around $150 million through use of lower priced suppliers.
Commenting on the findings, ACCC chair Rod Sims also noted how “shopping around could save Australian consumers hundreds of millions of dollars each year”.
“Consumers and small businesses tend to default to their usual bank to send money overseas, but this may not be the cheapest option. This is another example where consumers may end up paying more for their loyalty,” he offered.
The ACCC had undertaken the inquiry after findings were made by the World Bank in June last year that the cost of sending money overseas from Australia was approximately 11 per cent higher than the G20 average, 13 per cent higher than the UK and almost 40 per cent higher than the US.
What the inquiry found:
- Foreign cash is more expensive at airports than at other locations. According to the ACCC, when buying US$200 in February 2019, consumers could have saved AU$40 by purchasing from the cheapest supplier at a non-airport location compared with the most expensive airport supplier.
- Consumers using the most expensive bank to transfer US$7,000 would have paid more than AU$500 more than they would have, had they gone straight to the cheapest supplier.
- Customers of the big four banks using debit or credit cards without international transaction fees instead of a travel money card could be saving up to AU$13 on a US$200 purchase.
- Customers of the big four banks could save up to AU$5 on a US$200 purchase by using a “regular” debit or credit card instead of a travel money card.
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