The ACCC say Aussies overpay millions for overseas money transfers: here’s how transparent pricing could save you big bucks

Katherine O'Chee

Friday 13 September 2019

When it comes to sending money overseas, many Aussies aren’t shopping around for the best deal. Instead, they’re sticking with the big four banks to make International Money Transfers (IMT), wasting unnecessary dollars on a poor exchange rate. 

The ACCC say Aussies overpay millions for overseas money transfers: here’s how transparent pricing could save you big bucks

Those are the findings of the Australian Competition and Consumer Commission (ACCC)’s recent Foreign Currency Conversion Service Inquiry. And according to this inquiry report, the confusion around how pricing works for cheaper (non-bank) IMT services is one reason why some customers aren’t looking beyond the big banks for better value alternatives.

So as part of its recommendations, the ACCC called for greater transparency around pricing in the IMT industry, including showing any hidden fees or costs. 

RELATED ARTICLE: Big banks overcharging customers for overseas money transfers, finds ACCC

Why is transparent pricing so important? Specialist IMT provider WorldFirst’s Managing Director ANZ, Ray Ridgeway, said it can help people make more informed decisions about their money transfer options. 

“The FX [foreign exchange] industry has long been renowned for its complex and unclear pricing structures, which has resulted in customers having no idea as to whether they’re getting a good deal or not,” Ridgeway said.

“You wouldn’t go into a shop and buy something when you’re not completely certain about how much it costs. Why should FX pricing be any different?” 

WorldFirst themselves have published information about their pricing on their website, giving customers - in Ridgeway’s words - “a full view of what every transfer is costing you.” 

But it’s not always easy wading through the terminology and figuring out what it all means. So we’ve given you a breakdown of the basics below, including what you should look for when deciding which IMT provider could save you in the long run:  

How IMT pricing works 

To work out the true cost of a money transfer, Ridgeway said that you first have to know what the ‘margin’ is. The margin, to put it simply, is the difference between: 

  • The exchange rate at which your bank or FX provider purchases a currency (i.e. the market or interbank rate) - this is generally what you’d see on Google or the news
  • The exchange rate at which they then give you the currency (i.e. the quoted rate)

To get the most bang for your buck, make sure the gap between the quoted rate and the market rate is as minimal as possible. That’s because the smaller the margin is, the less it’ll cost you to make a transfer. 

Let’s take an example to illustrate why that’s the case. 

Here are two different margins for a $5,000AUD transfer: 4.26% and 0.50%.

  • If the margin was 4.26%, your transfer would cost you $213AUD.
  • If the margin was 0.50%, your transfer would only cost you $25AUD. That’s a saving of $188AUD - over eight times cheaper than the first deal! 

To figure out the transfer cost, all you’ll need is a calculator. Punch in your transfer amount (e.g. $5,000) and multiply it by the margin (e.g. 4.26% would be 4.26 divided by 100). The number that shows up after you press the equal sign is your transfer cost.

Ridgeway said a key part of making IMT pricing more transparent is to disclose the margin.

“Most banks and providers will only advertise a set fee for a transfer, but give no mention of the margin on their exchange rate; these providers are consequently hiding the true cost of the transaction,” he said. 

“Additionally, if an IMT provider advertises ‘fee-free’ transfers and they do not display their margins, know once again, that their costs are hidden in the exchange rate.” 

Planning to send money abroad? Head over to our International Money Transfer comparison table to find a great deal for you.

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