InstaRem, a Singapore-based fintech the ACCC named as havong the cheapest FX terms in Australia
The competition regulator has accused the major banks of contributing to the high cost of sending money overseas from Australia as independent remittance providers struggle to regain a foothold in the international transfer market.
The final report of the ACCC’s inquiry into currency conversion services has found the pricing of international money transfers (IMT) by the major banks is rarely market-leading.
“The average price of sending money from Australia via international money transfer (IMT) is high by world standards,” the ACCC found.
“There are many possible reasons for this, but the evidence suggests that the big four banks, who are significant IMT suppliers, have generally not been focused on offering the lowest prices.”
A key finding of the inquiry was that the big banks set pricing in line with each other and at a level higher than other cash transfer providers.
Margins on international transfers were so high in Australia in 2016 that one major bank acknowledged that its pricing strategy could be a reputational risk.
Data collated by the inquiry in February 2019 indicates that CBA was the most expensive bank to transfer money overseas in US dollars and pound sterling.
Of the seven providers monitored, the cheapest providers were the non-banks InstaRem and TransferWise.
According to the ACCC data, CBA charged $A500 more than TransferWise to send $US 7000 overseas.
The inquiry said it had concerns about barriers to entry in the international transfer market and the threat to independent remittance providers of being “de-banked” by one of the Big Four.
To execute cross border transactions, remittance providers need to have an account at an Australian bank.
However, since 2014 the major banks have been closing many such accounts on concerns that the remittance businesses are not able to comply with local and international anti-money laundering laws and sanctions regimes.
The ACCC found that such “de-banking” practices had undermined competition in the IMT market.
“We consider the prospect of ‘de banking’ faced by non-bank IMT suppliers to be a significant threat to competition in the supply of IMTs,” the inquiry concluded.
The ACCC inquiry recommended that work start on the development of a scheme through which IMT suppliers can address the due diligence requirements of the banks.