Calls for government to investigate banks’ deceiving international money transfer fees

New research by Wise reveals a significant number of Kiwis who transfer money overseas do not understand the costs associated with the transfer.

Nearly one third (29%) of Kiwis who have transferred money overseas have little to no understanding of the fee structures, which can include FX fees, transfer fees and exchange rate mark-ups - all of which are grouped into one fee.

The data sheds light on New Zealand’s deceiving remittance industry where banks and other financial service providers are able to charge onerous fees for international money transfers.

But the Commerce Commission report on personal banking merely included preliminary ‘desktop research’ into the matter (see Attachment E), suggesting further investigation into the banks’ pricing structures for international transfer fees should take place.

There is currently no government oversight or regulation on international transfer fees in New Zealand.

Jack Pinczewski, Asia-Pacific government relations manager for Wise, says that until this is addressed, everyday Kiwis will continue to pay a hefty price.

“The issue really boils down to a lack of transparency. Most people don’t even realise they’re being misled by the banks. In fact, 57% of New Zealanders agree their banks make it easy for them to understand the cost of transferring money overseas. They’re being educated by the very organisations that are ripping them off.

“The Commerce Commission’s report will help establish a fairer banking market in New Zealand, but the job isn’t finished. We need the Government to further investigate international transaction fees.”

Hidden bank fees

In addition to upfront transfer fees, most banks will often add mark-ups and margins to the exchange rate by setting their own price rather than using the mid-market range.

“Bank fees can account for 2 - 5% of the full transaction amount, which is significant when you consider this new research that shows nearly three in five (57%) New Zealanders have transferred money overseas.”

The research reveals that while 89% of people who’ve sent money overseas using the bank know that this incurs a fee, less than a quarter of them (24%) were aware that this may include markups and margins on the exchange rate, while just 18% were aware an exchange rate fee may also apply.

It’s no surprise that of those who make overseas money transfers, 61% prefer using online money transfer providers, which are often associated with better exchange rates, faster transfer times, ease of use and lower fees.

But alternative providers can often be just as guilty of marking up fees on international payments as the banks.

“Paypal or Western Union for example regularly charge even bigger fees than the banks, consisting of mark-ups on the exchange rate and/or an additional fee,” explains Pinczewski.

“Kiwis with family members living overseas are particularly hard done by when it comes to overpriced fees on international money transfers.”

Previous Wise research reveals that half of migrants living in New Zealand (51%) send money back home, with some doing so every month (11%).

“This isn’t just a remittance issue either,” says Pinczewski, “the same exploitative methods are used for other international payments too. How many of us are purchasing goods from internationally-owned websites? How many Kiwi businesses are importing goods from overseas markets and or paying an international workforce? This is a significant problem. Kiwis shouldn’t have to pay unnecessary fees, and at the very least they should know exactly what they’re paying for.”

The Commerce Commission concludes in its report that the issue of international transfer fees ‘would benefit from further investigation to understand the nature and size of the problem in New Zealand.’

Wise says that its research provides critical insights into both, and it's calling on the Government to launch further investigation into the issue, as a ‘first step’ towards increased regulation and greater transparency.

Wise is an online international money transfer provider with over 16 million customers worldwide. Wise uses the mid-market exchange rate, shows all fees up front, and does not charge hidden fees on the exchange rate. It even has an online tool that compares the cost of sending money from New Zealand with Wise against New Zealand’s banks and providers.

About Wise

Wise is a global technology company, building the best way to move and manage the world’s money.

With Wise Account and Wise Business, people and businesses can hold over 40 currencies, move money between countries and spend money abroad. Large companies and banks use Wise technology too; an entirely new network for the world’s money. Co-founded by Kristo Käärmann and Taavet Hinrikus, Wise launched in 2011 under its original name TransferWise. It is one of the world’s fastest growing, profitable tech companies and is listed on the London Stock Exchange under the ticker, WISE.

16 million people and businesses use Wise. In fiscal year 2023, Wise processed approximately £105 billion in cross-border transactions, saving customers around £1.5 billion.

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