ACCC report explains how skipping big banks could save you $200 million on international transfers
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In a world where international borders are increasingly blurred by digital communication and global relationships, sending money overseas has become a routine part of life for many Australians.
Whether it's for supporting family abroad, paying for services, or managing property overseas, the need for international money transfers is on the rise.
However, this convenience comes at a cost, and it's one that many Australians may not realise they can significantly reduce.
The Australian Competition and Consumer Commission (ACCC) shed light on a simple yet effective strategy that could collectively save Australians a staggering $200 million annually.
The secret? Bypassing the big banks and opting for alternative transfer providers when sending money abroad.
The ACCC's recent report, ‘Transparency and Competition in International Money Transfer Services’, highlights the substantial savings available to consumers who are willing to explore their options.
With the rise of financial technology (fintech) companies, the landscape of international money transfers has been transformed, offering consumers more competitive rates and lower fees than traditional banking institutions.
The big four banks in Australia have historically dominated the market for international transfers, but their grip is loosening as savvy consumers catch on to the benefits of shopping around.
The ACCC's research indicates that about 24 per cent of money sent overseas from Australia is in US dollars, followed by Euros at 13 per cent, and British Pounds at 12 per cent.
The most common destinations for these funds are the US, England, New Zealand, the Philippines, and India.
‘The overwhelming reason for sending money overseas is to support family and friends living abroad,’ the report stated.
Fintech companies have made a splash in the market by offering not only better technology but also more attractive pricing.
Since 2016, these companies have seen their monthly transactions skyrocket by 2200 per cent, from $60 million to an impressive $1.48 billion as of January 2024.
While banks still handle the lion's share of business and wholesale transfers, particularly those over $40,000, the average transfer amount for fintechs is a more modest $745, compared to the banks' $3100 and $770 for traditional international transfer suppliers.
However, the ACCC warned that even with these advancements, both banks and fintech companies may still charge more than the target fee rate for G20 advanced economies, especially for smaller amounts, measured against a baseline of US$200 and US$500.
This is where consumer vigilance comes into play. The ACCC's 2019 research found that complex pricing and a lack of transparency made it difficult for consumers to make informed decisions.
An ACCC survey revealed that individuals from culturally and linguistically diverse backgrounds (those who speak a language other than English at home) or from households with incomes between $150,000 and $250,000 are more inclined to use banks outside the big four.
But regardless of one's background or income, finding the best deal requires a bit of detective work.
To combat this, the ACCC recommended that Australians compare foreign exchange calculators and shop around for the cheapest and fastest service.
They reminded everyone that exchange rates fluctuate daily.
It's also crucial to compare the amount the recipient will receive to avoid any ‘trick calculations’ the sender might need to make for fees and foreign exchange margins.
‘Suppliers who advertise as fee-free may still charge a margin on the exchange rate. It is often hidden and sometimes negotiable or changes based on how much is being transferred,’ the ACCC cautioned.
As Australian consumers increasingly explore alternatives to the big banks to save on transfer fees and foreign exchange margins, it's essential to remain vigilant about potential risks associated with these financial choices.
While seeking cost-effective options can lead to significant savings, it's equally important to be aware of the security challenges that come with different financial service providers.
With ongoing cyber threats impacting Australia's big four banks, understanding how to protect oneself from these risks is crucial in maintaining both financial efficiency and security.
Have you had any experiences with international money transfers that you'd like to share? Have you found a provider that offers great rates and service? Let us know in the comments below!
Whether it's for supporting family abroad, paying for services, or managing property overseas, the need for international money transfers is on the rise.
However, this convenience comes at a cost, and it's one that many Australians may not realise they can significantly reduce.
The Australian Competition and Consumer Commission (ACCC) shed light on a simple yet effective strategy that could collectively save Australians a staggering $200 million annually.
The secret? Bypassing the big banks and opting for alternative transfer providers when sending money abroad.
Australians could save $200 million a year by opting for low-cost money transfer providers instead of big banks, an ACCC report revealed. Credit: Shutterstock
The ACCC's recent report, ‘Transparency and Competition in International Money Transfer Services’, highlights the substantial savings available to consumers who are willing to explore their options.
With the rise of financial technology (fintech) companies, the landscape of international money transfers has been transformed, offering consumers more competitive rates and lower fees than traditional banking institutions.
The big four banks in Australia have historically dominated the market for international transfers, but their grip is loosening as savvy consumers catch on to the benefits of shopping around.
The ACCC's research indicates that about 24 per cent of money sent overseas from Australia is in US dollars, followed by Euros at 13 per cent, and British Pounds at 12 per cent.
The most common destinations for these funds are the US, England, New Zealand, the Philippines, and India.
‘The overwhelming reason for sending money overseas is to support family and friends living abroad,’ the report stated.
Fintech companies have made a splash in the market by offering not only better technology but also more attractive pricing.
Since 2016, these companies have seen their monthly transactions skyrocket by 2200 per cent, from $60 million to an impressive $1.48 billion as of January 2024.
While banks still handle the lion's share of business and wholesale transfers, particularly those over $40,000, the average transfer amount for fintechs is a more modest $745, compared to the banks' $3100 and $770 for traditional international transfer suppliers.
However, the ACCC warned that even with these advancements, both banks and fintech companies may still charge more than the target fee rate for G20 advanced economies, especially for smaller amounts, measured against a baseline of US$200 and US$500.
This is where consumer vigilance comes into play. The ACCC's 2019 research found that complex pricing and a lack of transparency made it difficult for consumers to make informed decisions.
An ACCC survey revealed that individuals from culturally and linguistically diverse backgrounds (those who speak a language other than English at home) or from households with incomes between $150,000 and $250,000 are more inclined to use banks outside the big four.
But regardless of one's background or income, finding the best deal requires a bit of detective work.
To combat this, the ACCC recommended that Australians compare foreign exchange calculators and shop around for the cheapest and fastest service.
They reminded everyone that exchange rates fluctuate daily.
It's also crucial to compare the amount the recipient will receive to avoid any ‘trick calculations’ the sender might need to make for fees and foreign exchange margins.
‘Suppliers who advertise as fee-free may still charge a margin on the exchange rate. It is often hidden and sometimes negotiable or changes based on how much is being transferred,’ the ACCC cautioned.
As Australian consumers increasingly explore alternatives to the big banks to save on transfer fees and foreign exchange margins, it's essential to remain vigilant about potential risks associated with these financial choices.
While seeking cost-effective options can lead to significant savings, it's equally important to be aware of the security challenges that come with different financial service providers.
With ongoing cyber threats impacting Australia's big four banks, understanding how to protect oneself from these risks is crucial in maintaining both financial efficiency and security.
