OUR SIXPACK OF RECOMMENDATIONS
We know transparency is no silver bullet, but it’s key to help us achieve the 3% UN Sustainable Development Goal. Increased transparency empowers people to shop around and find the best deal. And increased competition will put downward pressure on transfer costs, accelerating the path towards achieving the UN goal of 3%.
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It’s nearly impossible to figure out what the cost of sending money is, and what current charges cover. That’s why it’s important that all providers in the industry communicate fees in a clear and understandable manner. Those fees need to be disclosed before the payment is confirmed and need to be presented in one upfront amount, so consumers know exactly how much it is going to cost them to send that money. Crucially, it needs to be separated from the sending amount. This means that if someone sends €250 to another country, the total cost of that payment is €8.5. Importantly, this should include both the upfront fee (e.g. €5) and the exchange rate mark-up, e.g. €3.5 when we compare the provider’s rate to the mid-market rate). Doing this will help people understand exactly what they’re paying for.
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| Banks, brokers, bureaux de change all have their ‘own’ exchange rates, usually much higher than the mid-market rate. Often, that’s because it includes a ‘spread’ which allows providers to hide the money they make on international payments. But people often Google what the exchange rate is, to have an estimate of how much their recipient will receive, and it leads to a nasty surprise when the expectation is much more favourable than the reality. We’re calling on the industry to stop hiding spreads in inflated exchange rates. If they use a different exchange rate, it should be compared to the mid-market rate so the spread can be communicated as a cost. |
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Currently, there is no agreed benchmark rate that providers need to adhere to in order to calculate the total cost of sending money abroad. The mid-market rate is the neutral benchmark rate that makes the most sense, as it can be sourced easily from a whole range of neutral providers. It is the one available to everyone when they search online, and fluctuates as rates do throughout the day. Relying on daily, fixed rates rather than live rates, means that the true costs still won’t be clear as the fixed rate is different from the one people may have found online at a different time in the day. |
| Some regulations have tried to increase transparency for international payments, but cash hasn't been included. This means we create second class transactions, where consumers don’t benefit from transparency simply because they choose to pay in cash. Cash payments should be subject to the same transparency requirements as digital payments, allowing consumers to compare costs regardless of the payment method they choose. |
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Our financial systems are mainly guarded by banks, and often companies who provide remittance services rely on banks to ensure money moves around. However, banks can decide to ‘off-board’ those remittance service providers from one day to the next, putting remittance senders at risk of losing access to the service at short notice. This practice is called de-risking, and could easily be mitigated by allowing these non-bank remittance providers to access the payment infrastructure directly, so they are no longer solely reliant on banks. |
| Today, consumers remain in the dark about the time it takes for their money to arrive on the other side. It’s not uncommon for delivery estimates to say ‘between 1-5 days’. This increases consumer worry and makes planning payments challenging. All providers should seek to show their customers how long these transactions will take, with as much accuracy as possible. |
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