.svg)
Wise has taken aim at banking competitors as it pushes for UK policymakers to crack down on hidden inflated exchange rates as part of the HM Treasury’s ongoing payment service regulations review.
The UK fintech argues that weak regulations allow banks and transfer providers to hide their actual costs in cross-border payments.
According to Wise, international payment providers often tell their customers that they charge zero fees or are free, but as the transfer provider sets the exchange rate, firms can add a margin on top of the actual mid-market exchange rate.
The company argues that HM Treasury’s payment service regulations review now presents an opportunity to fix this issue.
“The government is asking for feedback on how to improve payments, and they should prioritise increasing transparency so people — and businesses — know exactly how much they pay and can find a better or cheaper provider more easily,” Wise says.
The fintech unicorn has been advocating for more transparency regarding exchange rates since May 2020, shortly after the Cross-Border Payments Regulation (CBPR) came into force in the EU.
The CBPR, which was also adopted by the UK, requires banks and transfer providers to disclose the actual cost of international money transfers.
However, the legislation falls short of discussing which rate to use when calculating the exchange rate markup, leaving the opportunity open for transfer providers to set their own rates.
Additionally, they only apply to transfers from GBP to EUR.
“The weak language in the PSR [Payment Services Regulations] continues to cost British consumers and businesses billions in hidden fees every year,” Wise said, claiming that these hidden fees cost UK individuals and businesses £5.6bn in cross-border payments in 2022.
In an August report, the fintech estimated that high-street banks, such as HSBC, Lloyds or Barclays, can earn around 2 to 3.6 percent of the transaction value in international transfers.
Wise, which itself earned £225.2m in revenue from cross-border payments in the last quarter, said banks and cross-border payment providers should disclose these prices too.
But unlike banks, Wise discloses exactly what a foreign currency payment costs before the transfer is made.
“Transparency is the only way that will enable people to compare costs, find better deals and put downwards pressure on prices,” the firm said.
The fintech is asking everyday UK citizens to tell their own experience with cross-border payment fees to the Treasury as part of the government’s ongoing consultation.
To encourage more activity, the fintech posted an email template that people can use and personalise to their own case.
“Help us ban hidden fees and make transparency in international payments the norm by responding to the Payment Services Regulations’ Call for Evidence,” the company appealed to the public.
“Explain how you or someone you know was ripped off by hidden fees and what needs to change.”
Wise has more than 15m users and processed £26.4bn in cross-border payments in the last quarter. The company said it saves customers more than £1bn a year in cross-border payments.
