The big four banks have been rorting Aussies of hundreds of million of dollars every year in foreign currency fees – now the government is cracking down

Australian going abroad are shelling out too much cash in fees . (Photo by Michele Mossop/Getty Images)
  • The Australian Competition and Consumer Commission (ACCC) has completing its inquiry into foreign exchange (FX) service providers, finding that Australians are paying far too much in exorbitant fees and poor exchange rates.
  • The main reasons FX providers had managed to get away with charging both were a significant lack of competition in Australia and a lack of transparency in what customers pay when changing or transferring money.
  • The ACCC has now produced a guide for consumers to avoid overpaying as well as requirements for how businesses should display their fees, with the watchdog threatening penalties for those that don’t conform.
  • In one of the few brightspots for Australians, the ACCC noted that the entry of new competitors into the market has helped give customers more choice. The arrival of fintechs like Transferwise, for example, has undercut incumbents with greater transparency hopefully driving fees lower.

A glance at any Australian’s social feed would suggest half the country is overseas at any given point in time.

However, despite that tendency to travel, we’re also a nation who pays through the nose to swap our hard-earned dollars for the pesos or pounds we crave. Now it’s official — baked into a 100-page plus government report released by the competition watchdog on Monday.

“Australian consumers are paying too much for foreign currency conversion (FX) services because of confusing pricing and a lack of robust competition,” the ACCC’s FX inquiry concluded.

While that’s no revelation for any Aussie who has shelled out their shekels to go abroad, the sums involved are staggering.

The aforementioned lack of competition in part stems from the oligopoly of Australia’s big four banks — ANZ, NAB, Westpac and the Commonwealth Bank — and they form a big part of the problem with FX fees.

Take for example those Aussies who used one of the big four to get their hands on British Pounds or US dollars last year. They would have collectively saved $150 million in fees had they simply used a competitor, according to the ACCC.

That doesn’t cover any other currency nor does it even include all of the fees charged. The $150 million figure is simply the difference between them and their lower-priced competitors.

Currency exchange platform Transferwise, for example, estimates that nationally the total hidden FX fees we pay each year is closer to $2.14 billion.

Let that sink in a moment.

The World Bank found Aussies pay about 11% more than the G20 average and around 40% more than Americans.

But why do customers pay it? One reason is they simply are not aware of what they’re paying.

“Australia is definitely one of the most expensive markets we’ve seen and the main reason for that has really been that they’re getting ripped off. The banks may say they’re charigng a low fee but then really hit you on the exchange rate,” Venkatesh Saha, Transferwise head of Asia-Pacific expansion, told Business Insider Australia.

“The second is that you don’t know how much you’re going to be charged when the money goes through the corresponding banking network so they pay and they feel the pain later.”

The ACCC’s inquiry has now produced a guide to help travellers make better and more informed decisions.

“The guide will help consumers to shop around, carefully select where and how they pay for their purchases and to identify fees so they can get the best deal,” chair Rod Sims said in a release announcing the guide.

“[It] explains how foreign exchange services with low or no fees are not always the best value for money…[and] we have also tried to clear up a few misconceptions, such as the assumption that paying in Australian dollars when shopping overseas is always best when that is not the case.”

The ACCC has also outlined how businesses should present their fee structure to customers and says it will now take action against those who hide their fees.

“The ACCC will take action against businesses who do not make appropriate disclosures to consumers,” Sims said.

This combined with an increase in competition should help go some way to tackling the issue.

“The market is, is very concentrated, with the existing services that are in the markets, but now, of course, we’re seeing competition coming into the market, whether it’s Transferwise or other fintechs operating in this space,” Transferwise Australia country manager Nick Lembo told Business Insider Australia.

“Historically there hasn’t been any incentive for existing incumbents to compete. As new services enter the market though, they might have to do better.”