Whilst the personal payments industry as a whole owes a great deal to the likes of Transferwise et al for engaging it's target audience in a dialogue about 'out-of-touch' charging, is their approach disingenuous?
If you have ever tried to do an online payment through your bank then you will know that the cost of sending the payment and the rate of exchange offered and applied to the exchange itself are two different things.
Your bank will show you what rate of exchange they are prepared to apply. This will include their mark-up or 'margin'. Many would argue that a bank should not be marking up this rate of exchange at all, but, in the same way that a lot is said about how we enjoy predominantly free banking in the UK, no service should be free if it is worth having and you, as the customer, are entitled to judge the worth of your bank based on their foreign exchange margin in precisely the same way you would their savings interest rate of their Standard Variable Rate on your mortgage.
Let's say you hold pounds sterling (GBP). That is what you own. You do not own Euros. You can buy euros with your pounds sterling, but, you do not get to set the price or cost of those euros. You are at liberty to go to the most competitive institution to buy the euros you want...
Surprising as it may seem - this is essentially a piece in defence of your bank (ish).
Yes, 'tech' advances mean that the effort and expensive man-power that go into servicing a portfolio of clients over an online platform is far less than it was when the sector was young and manual, but, banks charge you what they consider a fair price for the level of investment they have put into catering not just for that, but all your day to day banking activities.
Should they be demonised and mocked if someone else can do it cheaper?
Whilst you reflect on that question we have a scenario for your to consider:
If the restaurant up the road from you makes delicious pizza and sells it for £10 a go, but has a mandatory charge of £2 to deliver it to your door, when I come along and offer you the same £10 pizza but say I will only charge you £1 to deliver it to you, can I rightly say I am 50% cheaper than the restaurant up the road?
I suppose I could, but, if I was purely telling you, blanket, that I was 50% cheaper than the restaurant up the road, you would be forgiven for thinking I was selling my pizza for £5, right? Do you see the clever technique used here?
Whilst we in the personal and business international payments space owe companies like Transferwise a huge debt of gratitude - because they spent the money on advertising to engage our target market in a discussion about cross-boarder payments - does that mean that we should turn a blind eye to the small print or spin?
Their newly launched multi-currency account charges a 0.5% margin or 'fee' for all currency exchanges using this new facility. They do not publish the mark-up/margin they apply to your exchanges if you do not use this multi-currency facility. Whereas they exchange you money at what they call the 'real' exchange rate, they also charge you a standalone fee for their service. These #fintech unicorns are not the Robin Hoods of international finance; they are just making use of loopholes which will be common place in years to come. We suppose the question is 'do you care?'
The most critical indictment of the banking sector is to do with the unjustifiably large margin they apply to the exchange of payments, not the flat and upfront fee for the electronic transmission of funds. How, therefore, is a company like TW operating any differently and, the more pressing question, not being called out on it!?
Certain high street banks offer exactly the same mark-up to their bigger corporate customers (the same mark-up as this new 0.5% TW fee), and yet, technically, Transferwise would still assert they are up to 80% cheaper than these banks because they charge £4 to transact the money as opposed to £10.
Focussing on the transaction fee is focussing on one aspect of an international payment. It ignores the far more costly abuse of a client's trust that comes with taking a margin wider than one should.
With a huge number of clients now on their books, this large player in the international payments space has spent the money on acquiring their client-base and have/are simply and covertly adopting the practises of their main competition now that those clients have lost faith in their banking provider. >>> . We're not totally sure that is fair . <<<
The larger a company the greater their buying power and, by extension, the more competitive they could/should/would be - were it not for the fact that stakeholders in their growth and development now want their trust and investment to be rewarded.
If Prime Cap said we would send your money abroad for free, with £0 charges...does that mean we are 100% cheaper than high street banks? No. That would be patently absurd; and yet, messaging like that is at the core of Transferwise's marketing rhetoric.
So, we mention this not to dismiss or rubbish the competition, and not to absolve the banking sector from their obligation to provide value to the various parties invested in their monopoly (private & public), but, rather because we believe that promoting yourself at someone else's expense is a short term strategy, easily unpicked...and, the premise a customer buys into should, in our view, be about using technology, as a whole, to best effect - this cannot be done without guidance.
Bring us a rate of exchange and we will be more than happy to 'quote you happy'.
As all our prices, terms and solutions are bespoke, you won't be able to compare us until you call us, but, so committed at we to ensuring your time is not wasted, we will ensure our rate is better than that of the next man, regardless of how well funded they are! - RANT OVER -
We look forward to your call.
0203 172 8193