LONDON—Just how much does it cost to send a remittance using a bank in the United Kingdom? No one is quite sure, as the banks made it difficult to know, according to a new report.
“Knowing exactly how much a cross-border payment costs is a right protected by law in the UK and the E.U.,” FinExtra reported. “However research carried out by Wise, shows that financial providers continue to make it difficult to find or hide fees in inflated exchange rates.”
The Cross-Border Payments Regulation 2, considered a landmark piece of legislation that directly called for banks to enforce transparency, came into effect in 2020. The law required that “all currency conversion charges are shown in a clear, neutral and comprehensible manner” ahead of making a transfer to another currency in Europe. This means that any cost needs to be disclosed, Finextra explained.
Loopholes Exploited
“Typically, the cost of a transaction consists of two components: an upfront fee and a currency conversion fee, included in an inflated exchange rate,” the report explained. “The new regulation aimed to stop the latter practice and lead to increased transparency for consumers moving money across borders within Europe. But three years in, 92% of the banks analyzed by Wise exploit loopholes in the law and remain opaque about their currency conversion fees. This ambiguity represents a billion-pound bill for both consumers and businesses in the U.K., who lost £5.6bn to hidden fees in 2022 alone.”
One-Fifth Show No Information
According to the report, of the 25 banks analyzed, 20% don’t show any information about the exchange rate used at the moment of making the transfer; 72% show an exchange rate that is not the mid-market rate, but their own inflated exchange rate.
“This added mark-up is not communicated as a cost to the consumer. It is common practice in the industry to advertise low or even zero fees, while in reality banks are hiding an additional fee in an inflated exchange rate,” Finextra said.
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