Even as the pandemic forced businesses across the world online, banks refused to modernise their international payments offerings. As a result, Australian businesses are giving up on growing their businesses overseas.
The findings of a new global survey conducted by UK market research firm YouGov saw as 54% of Australian businesses cite cumbersome legacy banking infrastructure as one of the leading deterrents to trying to break into new markets around the world.
Tristan Dakin, Australian country manager at Wise, told Business Insider Australia that the trend has been on a steady decline over the last five years, and only been made worse by the border restrictions thrust upon the market by the pandemic.
“The pandemic has really restricted a lot of the physical movement that is required of a business looking to open accounts overseas, to manage their finances in other jurisdictions, with incumbent banks,” Dakin said.
“[It’s also become] a lot harder to open up accounts from a verification and due diligence perspective, as [banks introduce] more controls around anti-money laundering, counter-terrorist financing, and things like that — they have restrictive risk appetites,” he said.
A little over 80% of the Australian business leaders questioned told YouGov that they were banking with a major, but only a quarter of them felt they were getting “bang for their buck”.
Of the 81% whose businesses rely on big bank payment infrastructure, 39% said the costs associated with international banking forced them to bump plans for international expansion down the priority list.
Another 32% said fee structures were often confusing, and that they were often caught off-guard by surprise costs, while 27% said the major banks just aren’t nimble enough.
Dakin said that the findings make clear that banks treat international payments services as auxiliary products that earn them massive margins, thanks in large part to “customer inertia”.
“And I don’t think there’s any incentive for them to solve that,” Dakin said. “You know, these banks have massive balance sheets, and a huge amount of resources available to them. If there was any sort of incentive for them to mobilise on that, they would have.”
One major pitching itself as a digital outlier is the Commonwealth Bank of Australia, whose CEO Matt Comyn has spent the better part of this year fielding a grab bag of digital initiatives, set to form a full-service digital ecosystem that competes with the likes of PayPal and Afterpay.
The strategy has yet to find any material love or success, though, as the bank tries to be “everything for everybody”, mimicking the niche interest offerings of its competitors, without any real utility.
Unlike PayPal, or even Dakin’s Wise, Comyn has offered little mention of his bank’s international payments infrastructure and the role it will play in his forward-looking digital-first strategy.
As it stands, international payments made by a business via CBA can be expected to reach the other party in three business days. At Westpac and NAB, it’s about the same, while ANZ offers a 48-hour turnaround.
By comparison, same-day international payments have become standard at cross-border fintech disruptors like Airwallex, which scored a $7.6 billion valuation last month, and Wise, which in some cases can turn around international payments in minutes.
While more than three-quarters of the Australian business leaders surveyed by YouGov said they “understand” their banking fee structures, only 23% were able to correctly identify them.
It’s difficult to blame them. CBA’s foreign exchange (FX) markup is tucked away in the depths of a costing sheet, and even the bank’s $6 transaction fee is three clicks from the standard business account’s summary page.
It’s no surprise then, Dakin said, that business leaders often just give up and sign on with whichever bank they do their personal banking with.
“They might use that bank for other things, and there’s an inertia from moving to a new product,” Dakin said.
“When you think about it, when you have an account — say, with CBA — that doesn’t then mean you can just easily open an account in the UK with the Commonwealth Bank, or open an account in the US with CommBank,” he said.
“From our perspective, banks are only there for lending and credit. Everything else is an ancillary product for them, which creates a pretty sub-optimal user experience.”