While improved transparency has lowered costs for Australian consumers who send money overseas, consumers are still missing out on over $200 million in potential savings, a new ACCC report on international money transfers (IMTs) has found.
The ACCC has been tracking developments in the market for IMTs since its 2019 Inquiry into foreign currency conversion services.
The ACCC's new report has found that the market for international money transfers has experienced significant transformation since the last report, as the total value of online IMTs continues to grow each year, driven by a shift from in-store methods to online transfers.
The report outlines how the growth in fintech businesses has reshaped the competitive landscape for IMTs. Fintechs have significantly grown their market share by offering cheaper prices and, sometimes, better service than the big banks. While the major banks have lowered prices in response to competitive pressure, the big four banks' prices still remain higher than many of their rivals.
Overall transaction costs for IMTs have decreased over recent years, as the industry's take-up of the ACCC's Best Practice Guidance for suppliers improved transparency for consumers.
"We are pleased that the industry's adoption of the ACCC's Best Practice Guidance has led to improved transparency for consumers, unlocking savings for those choosing competitive offers to send money overseas," ACCC Chair Gina Cass-Gottlieb said.
"Significant savings are available when consumers shop around, use online FX calculators to compare prices, and switch providers accordingly."
The report found that consumers who used the most expensive bank in February 2024 to transfer $10,000 Australian dollars' worth of US dollars, could have saved more than $400 if they chose the cheapest IMT supplier in our sample.
It also found that, based on the average transfer with a big four bank of just over $3000, consumers could each save over $100 per transaction by switching to a low-cost supplier.
However, IMT costs in Australia remain above the G20 targets of 1 per cent for IMTs to advanced economies and no more than 3 per cent for remittances to emerging market economies by 2030.
In conjunction with the Behavioural Economics Team of the Australian Government (BETA), the ACCC conducted consumer research to better understand consumers' experiences using IMT services, particularly online FX calculators.
"Following consumer research, we have proposed amendments to the Best Practice Guidance to help provide further transparency to consumers so they can better compare IMT suppliers' online FX calculators," Ms Cass-Gottlieb said.
"We are now seeking feedback from IMT suppliers on those proposed changes."
The proposed changes to the Best Practice Guidance include requiring IMT suppliers to show the estimated time for a transfer to reach the recipient, and requiring suppliers to enable their customers to track the status of their payments. It also includes asking suppliers to subtract fees from the amount consumers want to send to assist consumers compare offers.
The ACCC invites submissions from IMT businesses on amendments to the Best Practice Guidance by 21 August 2024.
The ACCC has also released a new one-page guide to help consumers sending money overseas. The guide includes information on what to look for when comparing suppliers' FX calculators in order to get the best possible deal.
Background
Accompanying the report is an update to the ACCC's Best Practice Guidance for IMT suppliers. The ACCC's Best Practice Guidance is voluntary guidance that explains to suppliers how they should be disclosing prices to consumers.
The ACCC released the Foreign Currency Conversion Services Inquiry (FX Inquiry) final report in September 2019. While the FX Inquiry considered foreign cash services, payment cards (debit and credit cards that offered FX conversions), travel cards and IMTs, the Inquiry focused heavily on IMTs.
In 2020 and 2021 the ACCC released updates on its monitoring of the industry's adherence to the Best Practice Guidance, and by 2022 all major IMT suppliers were complying with the Guidance.
This report concludes the ACCC's role monitoring and reporting on financial services competition issues relating to Residential Mortgage Products (2018), Foreign Currency Conversion Services (2019), Home Loan Prices (2020), and Retail Deposits (2023).
