According to Wise, "rip off" bank foreign exchange fees cost British SMEs £2.8 billion in 2023.

The government is being urged by money transfer company Wise to amend inadequate laws that allow banks to conceal the expense of foreign exchange transfer fees imposed on small and medium-sized enterprises.

Madilyn Swift

February 23, 2024

2Min Reads

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Payments

According to Wise, hidden foreign banking fees cost UK SMEs £2.8 billion each year, erecting a fictitious barrier to entry for businesses looking to grow internationally.

According to data from Wise in January, HSBC charges the largest fee (3.7%) for GBP to EUR conversion rates, with Lloyds charging 3.6%, Barclays charging 2.75%, and NatWest, TSB, and Santander charging 2.5 percent.

According to Wise, lax regulation exacerbates the costly, convoluted, and sluggish services that currently dominate the market. This is because banks are exempt from the current, although inconsistent, payments transparency regulations due to a "corporate opt out." Because of this, banks can easily assert that they have "zero fees" or "0% commission" while concealing their exchange rate markup.

Wise is urging the government to end the opt-out process and to tighten regulations even further to permanently outlaw hidden costs for both consumers and enterprises. It has started a petition against Prime Minister Rishi Sunak on its website.

"For too long, financial providers have been charging wildly unfair fees and inflated exchange rates," states Magali Van Bulck, head of Emea policy at Wise. The government can put an end to this right now without spending a dime on the taxpayer. Unexpected costs are bad for everyone, but SMEs are particularly badly affected.

"The current legislation is insufficient and inconsistent, and because of a corporate opt-out, it doesn't even apply to SMEs. This raises prices, stifles competition, and denies SMEs opportunities for expansion and financial success."

For Wise, this has been a protracted campaign. Together with 14 of the largest fintech businesses in London, including Revolut and Monzo, the firm demanded an expedited review of the laws pertaining to hidden bank fees for overseas payments in July of last year.

The fifteen signatories of an open letter to Chancellor Jeremy Hunt asserted that in 2022, hidden foreign currency fees cost consumers and small and medium-sized businesses in the UK a total of £5.6 billion, and that the unclear laws that now exist allow large providers to continue making money from these hidden fees.