Money transfer company Wise asks MPs to mandate price transparency for international money transfers

International money transfer company Wise is asking MPs in Parliament's banking inquiry to recommend the Government mandate price transparency for international money transfers.

Appearing before the inquiry on Wednesday, Wise's Asia-Pacific Government Relations Lead Jack Pinczewski told MPs; "If you want competition-based solutions to banking problems, this is the low hanging fruit."

"Beneficial outcomes to customers can be born here. Particularly because this is such a sticky market. People don't normally go around shopping for this because they don't see what the cost is. The minute you can show someone the cost of something, they will start shopping around for a better deal and that's what we want," Pinczewski said.

"We're asking that the Committee recommend to government that price transparency in these transactions be mandated as a means to make the market for international payments more transparent, and therefore more competitive."

'Specifically all online FX [foreign exchange] transactions have to have a requirement that the FX differential, that is the difference between the mid-market rate, the rate you'd see on Google, or the rate that Bloomberg would publish, and the retail rate that the bank is offering, be displayed to their customers at the time of transfer. It's not good enough that they're finding out after the fact," said Pinczewski.

In its written submission Wise says banks generally have a "take rate" of between 400 and 600 basis points on these transactions. Wise, in comparison, says its "global take rate" is 67 basis points. (Wise's pricing is here). Pinczewski said Wise already helps "millions of New Zealanders move money."

Pinczewski said work United Kingdom-based Wise commissioned from UK firm Edgar Dunn & Company estimates the cost of hidden fees in the New Zealand market, for consumer to consumer transactions, is NZ$200 million this year. If businesses and the money businesses are paying to their suppliers overseas is included, this estimate rises to NZ$700 million this year.

"We expect, based on the projections by Edgar Dunn & Company, that this will be in excess of NZ$1 billion every year from 2028. This is the cost to the NZ economy, dead weight loss. Economic rents charged by banks over and above what is necessary to make these transactions," Pinczewski said.

The terms of reference for Parliament’s banking inquiry, being undertaken by the Finance and Expenditure and Primary Production committees, don't specifically include international money transfers. Nor did remittances, international payments or foreign exchange feature in the recent Commerce Commission probe of competition for personal banking services.

However, in its final report, see page 379, the Commission said it had undertaken what it described as "exploratory research," saying this identified "features of these services that suggest there may be room to improve competition, particularly around international money transfers."

Pinczewski told MPs there's a lot of work being done around the world in this area at the moment. This includes from the G20 on reducing the costs and increasing the speed and convenience of cross-border payments, the European Union, the United States and Australia, where the Australian Competition and Consumer Commission has issued guidance.

"A bank is sitting in the middle and deliberately not telling their customer how much they are charging for these transactions. They're clipping a ticket. These transactions shouldn't cost this much," Pinczewski said.