A new report by the ACCC highlights the significant cost savings possible with improved transparency in international money transfers.
COSBOA is calling on the Australian Competition and Consumer Commission (ACCC) to take decisive action following the release of the ACCC’s report on international money transfers (IMTs). The report highlights that improved transparency lowers IMT costs and suggests that switching providers could save consumers over $200 million annually. However, COSBOA believes more can be done to support small businesses and consumers.
The ACCC’s draft update on their guidance for IMT providers includes a new ‘Best Practice Guidance’ which requires providers to subtract the fixed fee component of their prices from the amount being sent, thereby standardising the fee structure across the industry. While this is a positive step, Luke Achterstraat, CEO of COSBOA, argues it does not go far enough.
“The good news is that the ACCC is making changes that allow consumers and small businesses who do shop around to compare like-for-like. However, over 40% of consumers do not compare, and so this update does nothing to encourage them to seek better alternatives. The proposed rules are a minor step forward but fail to address the needs of those who are too busy or do not understand the market for foreign exchange services,” said Achterstraat.
For small businesses, the impact of non-transparent pricing and FX (foreign money exchange) margins can be significant. For example, the ACCC found that consumers and small businesses who used the most expensive bank in February 2024 to transfer the US dollar equivalent of A$10,000 could have saved more than A$400 if they chose the cheapest IMT supplier in the sample.[1]
Increased costs from higher transfer fees can make small businesses less competitive compared to larger enterprises that negotiate better rates or have access to more cost-effective services. Additionally, cash flow issues can arise from unfavourable exchange rates, making it difficult for small businesses to manage their finances efficiently.
COSBOA is calling on the ACCC and the government to adopt their own advice and include illustrations of FX margin costs in Australian dollar terms. This approach would make comparisons of IMT easier and encourage more Australians to compare providers and seek out the best deals, reducing the $200 million annual cost currently borne by consumers.
“Despite the recommendations from the Behavioural Economics Team of the Australian Government (BETA) and the ACCC’s acknowledgment that the current system costs consumers at least $200 million annually, the ACCC is deflecting key findings and calling for more consultation from banks and the payments industry – sectors that benefit from FX margins,” Achterstraat continued. “We want to see the importance of lower FX prices for small businesses recognised and acted upon.”
COSBOA is urging the ACCC to prioritise the implementation of these reforms to alleviate the financial pressures on small businesses and to foster a more competitive and transparent market. “We call on the ACCC to act now and not delay these essential reforms. Small businesses need relief, and they need it now,” concluded Achterstraat.
For more about COSBOA, visit: www.cosboa.org.au
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