Sending money overseas, and buying foreign cash, will be the focus of a new ACCC inquiry into foreign currency conversion services.
“Whether you’re buying Euros from your bank for an upcoming trip, sending money to family in Indonesia, or you’re a small business trading with suppliers in New Zealand, foreign exchange services are used by Australians every day,” ACCC Chair Rod Sims said.
“The World Bank has reported that Australians sent around AU$8.8 billion overseas in 2016. Yet they also found that Australia is the third most expensive G20 country for consumers and small businesses to send money from.”
“This means that if you send AU$1000 overseas from Australia, on average you’ll pay AU$9 more than if you sent an equivalent amount from the United Kingdom, and AU$23 more than if you sent it from the United States. Given the amount of funds Australians remit, these higher charges can amount to hundreds of millions of dollars each year across the economy,” Mr Sims said.
“We will be examining why major companies in Australia, including the big four banks, seem to be able to consistently charge high prices.”
The ACCC will examine price competition amongst suppliers of foreign currency conversion services and consider how easily potential entrants to the market can compete.
Core to the ACCC’s inquiry will be the way prices are presented to customers. The ACCC notes the Productivity Commission recently found that consumers struggled to understand and compare the different types of prices charged for international money transfers.
“The exchange rate you google is not the exchange rate you get from the big four banks. The difference is known as the ‘mark-up’, and it’s often a big part of the price consumers pay when converting currency,” Mr Sims said.
“Many consumers have complained to the ACCC about these high mark-ups, as well as the transaction fees that often apply on top of that.”
The ACCC has today released an issues paper, and encourages all parties to provide their views and experiences to the inquiry by 22 October 2018. The issues paper can be found at Foreign currency conversion services inquiry, and written feedback can be sent to firstname.lastname@example.org. Alternatively, consumers and small business have the option of responding to a brief questionnaire which can be found at Foreign exchange – Consumer & small business questionnaire.
“We are keen to hear from consumers, consumer advocacy groups, small businesses, and foreign currency suppliers on their experience on a range of issues, including transparency of pricing, costs, barriers to entry, and other factors affecting competition in the sector,” Mr Sims said.
“The ACCC will conduct this inquiry with an open mind, but with a view to making recommendations where appropriate.”
The ACCC’s inquiry is initiated under Part VIIA of the Competition and Consumer Act (2010) and will afford the ACCC with compulsory information gathering powers. The inquiry has received the necessary approval from the Treasurer of Australia as required by law.
The ACCC is expected to provide its final report to the Treasurer in May 2019.
The World Bank in its June 2018 Remittance Prices Worldwide report found that the cost of sending money from Australia is higher than both the G20 average and the global average cost. The cost of sending money from Australia was approximately 11 per cent higher than the G20 average, 13 per cent higher than the UK and almost 40 per cent higher than the US.
The World Bank reports in its Annual Remittances Data (updated as of April 2018) that outflows of remittances from Australia were USD6.355 billion in 2016 (AUD8.753 billion, based on an exchange rate of 0.726 as reported by the RBA as at 20 September 2018).
The Productivity Commission’s Inquiry Report on Competition in the Australian Financial System recommended that the ACCC, in consultation with ASIC, should investigate what additional disclosure methods could be used to improve consumer understanding and comparison of fees for foreign transactions.
The inquiry is the second inquiry undertaken by the ACCC’s Financial Services Unit (FSU).
The ACCC’s FSU proactively monitors and promotes competition in Australia’s financial services sector by assessing competition issues and undertaking market studies.
The FSU is also currently undertaking the residential mortgage products price inquiry with the final report due to be handed to the Treasurer on 19 November 2018.