Shadow Cabinet Minister welcomes campaign for more transparency in FX
73% of Brits say government needs to do more to tackle misleading pricing
London, Wed 19th Nov – YouGov, The World Bank, and Charterhouse Research found that:
- Banks and brokers charge as much as 10% for holiday money and 5% for sending money abroad. They misleadingly claim it’s “free”, “0% commission” or only a small fixed fee despite hiding the majority of the cost within an inflated exchange rate (see examples here – www.pinterest.com/transferwise/exposed-the-hidden-cost-of-foreign-exchange) ;
- 86% of Brits and 80% of British SMEs seriously underestimate or are entirely unaware of the full cost of foreign exchange services;
- Unsurprisingly, 91% of Brits believe “free” or “0% commission” should mean a service is totally free;
- Britain lost £1.3bn in exchange rate fees for buying holiday money in 2013.
Today TransferWise launches its manifesto for greater transparency in FX pricing – it has been welcomed by Shadow Cabinet Minister Chi Onwurah. The report calls on banks and brokers to:
1. Provide a clear breakdown of the costs associated with every transaction;
2. Publish the difference between the exchange rate offered by the provider and the true, mid-market rate;
3. Put an end to the use of misleading terms such as ‘free’ and ‘0% commission’ where hidden charges are applied.
TransferWise, in partnership with Change.org, has today launched a petition calling for the end of hidden fees in foreign exchange pricing.
Chi Onwurah, Shadow Cabinet Minister, said:
“Far too often British holidaymakers are duped into thinking they’re not paying currency charges when in fact they are. After the Libor and forex scandals, public confidence in foreign exchange transactions is at an all time low. So I welcome TransferWise’s campaign for greater transparency. I want UK holidaymakers to get the best deal possible – and know what they’re being charged.”
Taavet Hinrikus, co-founder of TransferWise, said:
“Cracking down on hidden fees is incredibly important to us. My co-founder and I started our business because we were fed up of misleading FX pricing when we first moved to the UK. In fact, hidden fees are so pervasive in the industry, we sometimes struggle to convince potential customers that “free” or “0%” commission” services aren’t free at all. Not only will cleaning up the system be great for consumers, it’ll be great for businesses like ours. Our polling shows that 58% of Brits would consider shopping around for their financial services if they could compare prices more easily.”
If you would like to receive the full report, a breakdown of the polling results or would like to have an interview with Taavet Hinrikus, co-founder of TransferWise, please call Antonia Rofagha (07727819746) or James Corcut (07879447577) or email firstname.lastname@example.org.
Notes to editors:
How do banks hide their fees?
Banks and brokers make big profits on charges applied within exchange rates. This is called an exchange rate mark-up, it’s the difference between the mid-market exchange rate at the time of transaction and the rate offered to the customer. The customer will always receive less than they would at the real mid-market exchange rate. This is a hidden fee that is charged on top of the transaction fee and is rarely communicated to the customer.
1. YouGov polling survey of 2,034 British consumers. It was carried out online between 6th-7th November 2014.
2. Figures based on quotes provided over the telephone by the customer service departments of UK foreign exchange providers during mystery shopping exercises carried out by Charterhouse Research in November 2014. The overall fee was calculated by establishing the exchange rate mark-up.
3. YouGov polling survey of 2,034 British consumers. It was carried out online between 6th-7th November 2014.
4. YouGov survey of 565 senior decision makers in businesses with 1-49 full-time employees. The survey was carried out online between 8th-11th October 2013.
5. YouGov polling survey of 2,034 British consumers. It was carried out online between 6th-7th November 2014.
6. Figure taken from the Office for National Statistics (ONS) Travel Trends – Section 5 UK Residents Visits Abroad, 2013. If we look at the total amount spent on holidays in 2013, we see that UK consumers spent £23.634bn on holidays. The average exchange rate fee on our mystery shopping was 5.53%, which equates to £1.307bn of fees.
International money transfers are more expensive than meets the eye – even when banks and brokers claim there are ‘no fees’. Many banks take as much as 5 percent of the money being sent. TransferWise is the clever new alternative that allows people to transfer money abroad at a lower cost than ever before. It uses technology developed by the people who built Skype to remove all the fees the foreign exchange industry has kept hidden for decades. Customers have already moved more than £1bn using the platform – an approach that has put over £45m back in their pockets.
How did TransferWise get started?
Estonian friends Taavet and Kristo came up with the idea for building the platform when they first became expats in London and were confronted by the high fees banks charge to transfer money abroad.
Taavet had worked for Skype in Estonia, so was paid in euros, but lived in London. Kristo worked in London, but had a mortgage in euros back in Estonia.
They realised they each needed the currency the other had, so they devised a simple plan: every month Kristo put pounds in Taavet’s British bank account and Taavet put euros in Kristo’s euro account. They used the official mid-market rate exchange rate (that’s the one in the papers, not the one invented by the bank). They both received the right amount of money, and neither paid any bank fees.
Within a few months they’d saved thousands of pounds and realised there were probably millions of others that needed a system just like theirs. So they set to work – the rest is TransferWise.
The business has transferred over £1bn worth of customers’ money, saving its customers over £45m in banking fees.
TransferWise started in early 2011 with the two founders, making transfers between just British pound and euro. It has since added a further 200 members of staff and 252 currency routes. The firm continues to grow between 15-20 percent a month.
TransferWise has attracted $33m from some of the world’s leading investors. Most recently this includes Richard Branson and Facebook’s first outside investor and co-founder of PayPal, Peter Thiel. TransferWise was his first Valar Ventures investment in Europe.
Other investors include SV Angel, fellow PayPal founder, Max Levchin, IA Ventures, Index Ventures, TAG (Robin Klein and Saul Klein), Seedcamp, Betfair’s former CEO David Yu, and the owner of Le Monde Xavier Niel (via Kima Ventures).
TransferWise is fully regulated by the UK’s Financial Conduct Authority (FCA; formerly the FSA – Financial Services Authority). REF 571669