Finance Finance News Banking Banks called out on cost of money transfer

Banks called out on cost of money transfer

Reserve Bank governor Philip Lowe has called out Australia's major banks for how much they charge customers for international money transfers. Photo: ABC News
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Reserve Bank governor Philip Lowe has called out Australia’s major banks for consistently charging customers more for international money transfers than their non-bank rivals.

The RBA has found that the big banks’ average currency mark-up over the wholesale exchange rate is about 5.5 per cent, compared to about 1.0 per cent for digital money transfer services.

Dr Lowe says customers often cop extra fees and, citing the findings of a consumer watchdog inquiry, don’t know where the quoted rate is in relation to the wholesale rate or how much they will receive from the transaction.

“The costs here are still too high and the payments are still too hard to make,” Dr Lowe told the Australian Payments Network Summit in Sydney on Tuesday.

“It is important that we address this.”

An exercise by RBA staff involving more than 70 international transfers from Australia showed the major banks were more expensive on all but two occasions.

The spread between the bank rates and those of their smaller rivals was widest for transfers to Fiji, Samoa and Tonga, and Dr Lowe said “people are being served poorly by existing arrangements”.

“Many people in the South Pacific rely on receiving remittances from family and friends in Australia and New Zealand,” Dr Lowe said.

“In many cases, low-income people are paying very high fees and it is important that we address this where we can.”

Dr Lowe said inefficiencies in the traditional banking system were partly to blame for the slowness and high cost of some international transfers.

With Westpac facing costly legal action over its failure to properly monitor international payments potentially linked to child abuse, Dr Lowe said the challenge to the big banks was “to offer better service at a lower cost to their customers, while still meeting their AML/CTF (anti-money laundering and counter-terrorism funding) requirements.”

-AAP