A recently published piece of research by Money Transfer Comparison, a specialist site for international money transfer companies, has found that the UK’s banks are still proving to be expensive options for handling international bank transfers. This is despite increasing competition from low cost money transfer providers.
The High Costs of International Money Transfer (+fees / +rates)
International bank transfers have long been a source of frustration for customers on account of the high translation fees and unfavourable foreign currency mark-ups levied by the banks.
Wire Transfer Fees
Whenever a UK bank sends money to, or receives money from a foreign bank account, they charge the account holder a transaction fee which ranges from between £10 and £30 depending on the bank. The notable, noble exception here is HSBC (including their subsidiary First Direct) who have emerged as one of the best banks for transferring money abroad in the UK. Their fees start at £2.75 and they also offer fee waivers for customers transferring funds between international HSBC accounts.
Foreign Exchange Costs
However, not only do account holders have to absorb these transaction fees, they also need to take the bank’s foreign currency exchange margins into account too. While unbeknown to many customers, banks do not convert foreign currencies at the prevailing open market exchange rate. Rather they use their own “marked up” rate which enables them to profit on the exchange at the expense of their (often unsuspecting) customer.
Who Are The Best Banks For Transferring Money Abroad? (And The Worst…)
As with the transaction fees, the exact amount of the mark-up (or margin) varies between banks and varies again depending on the foreign currency in question. As a guide though, the UK banks generally apply a mark-up of between 1.8% – 2.8% on sterling to major currency exchanges (ie, Dollar, Euro, Swiss Franc) and even higher mark-up on ‘exotic’ currencies. The worst offender here by far is Natwest who charge 5%+ on some sterling to global currency transactions.
The Customer Cost of Sending Money Abroad From UK
All in all, this can often mean that international transfers cost hard working UK account holders a lot more than they were perhaps expecting. Bank money transfer fees routinely leave customers feeling short changed by their bank.
At first glance, this may seem somewhat surprising and many commentators had expected the banks to begin lowering their transaction fees and reviewing their mark-ups in order to remain competitive. The last decade has seen a lot of money transfer specialists emerging from within the financial-technology sector who have been luring customers away from the banks in their droves by offering fee waivers and foreign exchange rates close to market rates. One well known money transfer provider Wise (formerly known as Transferwise) now has an estimated 5 million UK based account holders who rely on it for their money transfer needs; that all adds up to some serious lost revenue for the banks.
Why The Banks Don’t Seem To Care
However, industry experts are quick to point out that handling customers’ international money transfers was small fry for the banks. While the profit margins they make seem high from the customers perspective, they pale in comparison to what the banks make on large volume foreign currency trading which is where their attention remains. As such, the big banks are seemingly happy for the money transfer specialists to take their customers!
While the UK’s banks do charge high transaction fees and foreign exchange mark-ups, they are by no means the world’s worst offenders. Elsewhere in the Anglo-sphere the situation is even worse! Banks in Australia like Commbank charges transaction fees of 3% PLUS a 4% foreign exchange mark-up, and over in the U.S one single international transfer could potentially cost up to 10% in fees, cost and mark-ups.
What Next For Bank Money Transfer Fees in the UK
With the pound plummeting to its lowest ebb in decades, the cost of sending money abroad from UK is rising fast. As such, more Brits than ever before are now taking the issue of international wire transfer fees seriously and finding the banks to be seriously lacking. It seems quite clear that the banks have no intention of altering their transfer fees but the good news is that there are plenty of FCA regulated money transfer providers out there ready to pick up the slack.