Supply chain · 12 January 2016

Exchange rates: Hidden bank fees stall mirco firm growth

Currency brokers may be a better alternative for small businesses with currency exchange requirements
Micro firms conducting business overseas are increasingly at risk of being swindled by UK banks that are charging small businesses with hidden fees on international money transfers, a new study has found.

With close to 4bn in hidden transfer costs raked in by the country’s most popular high street banks each year, 96 per cent of the revenue banks receive from the average foreign exchange goes unseen by owners of small businesses.

The study, dubbed UK SMEs International Payments Analysis? the first of its kind by consultancy Accourt and online currency exchange service Money Mover showed a chronic lack of transparency surrounding transfer fees charged to small firms and how the fees are calculated.

Known as the ‘spread, the vast majority of the amount banks make from small firms comes from the margin added to exchanged rates from money markets, without firms seeing them.

Small business owners are likely to pay anywhere between 1.12 per cent and 3.68 per cent of the transfer amount due to spread on an average transaction of 75, 000 in the EU, the study found.

Money Mover CEO, Hamish Anderson, commented: This lack of transparency is not only unfair and uncompetitive, it’s also costing the UK’s small businesses precious cash in unnecessary fees.

the UK’s banks are collectively failing to give small businesses the knowledge, transparency and visibility which they need to make an intelligent and informed decision.”

Barclays was found by the study to be the worst culprit, charging 3.68 per cent on EU transactions of 75, 000, with Lloyds and Natwest also faring poorly, charging 2.71 per cent and 2.38 per cent respectively. Santander represents the best option for small firms the bank charging a lower average rate of 1.55 per cent.

The study revealed small business owners were frequently left in the dark about the amount being charged, without knowing the amount received by a recipient until after a payment is made. Firms were therefore unable to compare banks and fees to choose the lowest cost service.



Fred Heritage was previously deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London.