Yesterday, TransferWise, an authorized payment institution by the UK Financial Conduct Authority (FCA) providing money transfer services in FX launched its manifesto for greater transparency in FX pricing – it has been welcomed by Shadow Cabinet Minister Chi Onwurah. The report calls on banks and brokers to:
1. Provide a clear breakdown of the costs associated with every transaction;
2. Publish the difference between the exchange rate offered by the provider and the true, mid-market rate;
3. Put an end to the use of misleading terms such as ‘free’ and ‘0% commission’ where hidden charges are applied.
TransferWise, in partnership with Change.org, launched a petition calling for the end of hidden fees in foreign exchange pricing. To date, TransferWise has attracted $33m from some of the world’s leading investors. Most recently this includes Richard Branson and Facebook’s first outside investor and co-founder of PayPal, Peter Thiel. TransferWise was his first Valar Ventures investment in Europe.
TransferWise started in early 2011 with the two founders, making transfers between just British pound and euro. It has since added a further 200 members of staff and 252 currency routes. The firm continues to grow between 15-20 percent a month.
Shadow Cabinet Minister welcomes campaign for more transparency in FX
YouGov, The World Bank, and Charterhouse Research found that:
- Banks and brokers charge as much as 10% for holiday money and 5% for sending money abroad. They misleadingly claim it’s “free”, “0% commission” or only a small fixed fee despite hiding the majority of the cost within an inflated exchange rate (see examples here).
- 86% of Brits and 80% of British SMEs seriously underestimate or are entirely unaware of the full cost of foreign exchange services.
- Unsurprisingly, 91% of Brits believe “free” or “0% commission” should mean a service is totally free.
- Britain lost £1.3bn in exchange rate fees for buying holiday money in 2013.
Chi Onwurah, Shadow Cabinet Minister, said: “Far too often British holidaymakers are duped into thinking they’re not paying currency charges when in fact they are. After the Libor and forex scandals, public confidence in foreign exchange transactions is at an all time low. So I welcome TransferWise’s campaign for greater transparency. I want UK holidaymakers to get the best deal possible – and know what they’re being charged.”