Business & Investment

Remittances abroad: Currency markup by major banks revealed

The UK’s largest bank has been accused of violating the “spirit” of a new law designed to hide the true cost of sending money abroad and bring transparency to international payments.

According to a survey by This is Money and the currency conversion service Transferwise, people who want to send money to European countries are hit by up to 4.5% forex markup fees, even though payments appear to be “free”. understood.

Some banks were described as “in the midst of sneaky exchange rate hikes,” “embedded the true cost of payments,” and “hidden them in tooltips.”

European banks needed to be more transparent when it came to providing the cost of sending money abroad.But some British have been accused of filling their charges

European payment regulations, which will come into force at the end of 2019 and continue to apply after Brexit, will prevent banks from charging more for international payments than for domestic payments to countries that are members of a single euro payment area. I did.

This includes the United Kingdom, Norway, Iceland, Liechtenstein and Switzerland, as well as 27 EU member states.

Instead, major UK banks offer their clients foreign exchange rates that are inferior to the “real” exchange rates. This consumes up to € 50 in the amount the recipient receives when sending £ 1,000, depending on the exchange rate.

Banks are allowed to claim these markups by bank transfer, but under the transparency regulations that came into effect in April last year, banks give customers the currency of the payer’s account, including transaction fees. You need to provide an estimated total amount of credit transfer at. Currency conversion fees in a clear, neutral and straightforward way””.

Banks that responded to This is Money claimed to comply with all the requirements of CBPR2, the transparency regulation in question, and provided their customers with the information they needed to send money abroad.

However, this is the result of a Money and Transferwise study behind the “Mystery Shopping” exercises conducted in August and September 2020, suggesting that it does not necessarily adhere to the spirit of the law.

These findings remained accurate as of January 2021.

How much does the UK’s largest bank charge for “free” international payments?
bank Amount received when sending £ 1,000 as € Cost compared to the “real” exchange rate of the day % Markup
Barclays € 1,062.60 27.40 euros 2.5%
HSBC € 1,052.34 38 euros 3.89%
Lloyds € 1,055.70 39.28 euros Four%
National Building Society € 1,069 51 euros 4.5%
Natwest 1,149.7 euros 31 euros 2.7%
Santander € 1,099.75 34.76 euros 3.18%
Source: This is Money / Transferwise-the exchange rates were not the same as the calculations were done in August and September 2020

Instead, banks such as NatWest, HSBC, Nationwide Building Society, and Santander refer to “indicator” exchange rates or their own exchange rates, which have markup that eats up the amount customers receive. Not necessarily included.

For these four banks, the markup was the amount transferred between € 31 and € 51 on the day the charges were examined.

Nationally, it seems to be claiming the highest markup of the four, with customers rateing from € 1.069 to £ 1 with 4.5% markup on the day the “real” exchange rate was € 1.12. I received.

Banks, including NatWest, tell customers that they are not charged fees for sending money abroad to European countries, but do not disclose that they are being given inferior rates.

Banks, including NatWest, tell customers that they are not charged fees for sending money abroad to European countries, but do not disclose that they are being given inferior rates.

Barclays and Lloyds, on the other hand, display a percentage markup when the customer hovers over the question mark tooltip.

In a recent screenshot shown in This is Money by Barclays, the tooltip explains that the exchange rate “consists of a Barclays reference rate and a 2.75% margin.”

However, both are inferior to the exchange rates that customers can obtain elsewhere as a result of these markups. Lloyds charges a 4% markup on the day of the survey, which is equivalent to a cost of € 39.28. Remittance of £ 1,000 compared to the “real” exchange rate.

We have been warning consumers for a long time To avoid the UK’s largest banks when sending money abroad.

Other banks, including Barclays, have been accused of

Other banks, including Barclays, have been accused of “hiding” markup behind interactive tooltips.

“In general, the best approach is not to send money internationally through a bank account,” said Rob Hallums, founder of the financial website Experts for Expats, last year.

Flora Coleman of Transferwise said of the findings: ‘CBPR2 was introduced to increase the transparency of international payments, but banks and other providers may be in compliance with the provisions of the law, but their deployment is certainly not based on that spirit. Hmm.

“Our research shows that people haven’t yet shown actual payment costs, instead embedding them in sneaky exchange rate markup. They hide them in tooltips,” Some argue that there is no charge, but this is simply not true.

“This law should have made it cheaper for customers to send money abroad and make it easier to compare prices between banks. But as it is currently applied, when sending money abroad It always keeps businesses and consumers out of their pockets.

What did the bank say?

This is because Money contacted four banks but did not show the markup of the exchange rate charged to the customer or the rate offered compared to the “real” exchange rate ..

Stated in a national statement:’Our members can make euro payments to EU countries using SEPA credit forwarding. There are no transaction fees for payments made with SEPA.

“We meet the requirements of cross-border payment rules and ensure that currency translation rates are transparent.

‘The regulatory requirements that apply to credit transfers require that the payer be notified in a clear, neutral and straightforward manner of the estimated charges for currency conversion services applicable to credit transfers prior to the start of a payment transaction. “.

‘We provide members with estimated currency conversion fees as part of the payment request process within the Internet Bank.

‘Calculate the estimated rate by comparing the current national exchange rate with the current ECB Euro reference exchange rate. It meets the requirements of the rule.

Santander provided customers with the exchange rates used by the bank for the day and stated all international remittance fees during that period, but after real-time midmarket exchange rates, the new remittance service PagoFX must be used. Said there is.

“We will comply with all CBPR2 laws and regulations,” he said in a statement.

HSBC and NatWest did not respond by the time of publication.

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Remittances abroad: Currency markup by major banks revealed Remittances abroad: Currency markup by major banks revealed

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