Australians who send money overseas are handing over millions of dollars each year on outrageously expensive currency conversions, according to a new study by financial services research house Mozo.
If you’re about to send cash to a relative living outside Australia or pay a bill overseas, it pays to inspect the exchange rates your currency provider is offering.
That’s because the cost of sending money overseas on a typical $10,000 transaction can vary wildly depending on whether you use a bank or a competitive remittance specialist.
For example, if you had to pay a London-based company a bill for 10,000 pounds on April 29, it would have cost you $19,249 in Australian currency if you had used a market-leading remitter like World First.
According to Mozo, the same bill for 10,000 pounds would have cost you an average of $20,259 if you had paid through one of the four major banks.
Warning signs plain to see
That is a rather disturbing finding and should raise the antennae of local consumers.
However, most of us are still remitting cash through the four big banks and burning our savings – unnecessarily – for the privilege.
Mozo director Kirsty Lamont believes Australians need to bypass the banks to get the fairer deals.
“For a long time, the big four were among few operators which could execute international money transfers but now there are a range of online providers in Australia which are very willing to compete, especially on price,” she said.
“In fact, we found online money transfer providers are on average 4c cheaper per dollar transferred than the big four banks.
“When you’re transferring thousands of dollars, that adds up to hundreds of dollars in savings.”
Among the world’s most expensive
The Mozo study found that Australia is one of the most expensive places in the world to send cash overseas.
Using international money transfer data collated by the World Bank, Mozo worked out that Australia is the fourth-most expensive country to initiate a money transfer.
Only South Africa, Japan and Canada are more expensive.
The average global cost to transfer cash is 7.72 per cent but Australians are paying almost nine per cent.
If remitters only used banks for money transfers the average cost would be around 11.42 per cent.
The lower average cost of money transfers is due to the better conversion rates and lower fees offered by specialist online transfer providers such as World First, TorFX, and HiFX.
Mozo found that on average Australians were saving four cents on each dollar transferred by these companies than by going through the banks.
“It’s easy to make a transfer with a specialist provider by registering to transfer rather than being a customer,” Ms Lamont said.
Ms Lamont said the gaping price differences would eventually drive more Australians to the online providers.
“We expect the specialist providers to take market share off the big four as Australians notice the savings and convenience,” she said.
The study found that the banks also skin Australians when they receive cash from overseas.
If someone in London paid you 10,000 British pounds on April 29 you would have received $19,152 by going through World First.
If the money had been sent through the TorFX online service you would have received $19,142.
But if you instructed the London payer to send the money via your bank, only $18,378 would have arrived in your account.
Avoid getting slugged
Price shopping in the money transfer market can become very confusing because some uncompetitive providers will only give you the rates at which currencies are to be converted.
• If you’re sending money overseas make sure the service provider tells you in writing how much the payee will receive in their currency.
• Consult Mozo’s money transfer comparison tables here.
• Use an online money transfer specialist that gives live and aggregated quotes on the cost of your money transfer.
• Most online providers such as World First will generate an estimate of the net value of your Australian dollar transfer in another currency.
• Be mindful that currencies change every second, so the conversion value of your transfer is likely to be slightly different from the quote.
• Ring your bank and ask whether it can match a quote from World First or TorFX.