A group of 15 fintech companies, including Wise, Monzo, Revolut, and Klarna, have written an open letter to UK chancellor Jeremy Hunt, urging the government to put an end to hidden fees in cross-border payments. They claim that certain firms misleadingly present currency conversion services as having no fees while actually charging a considerable markup over the mid-market rate, resulting in significant losses for UK consumers and SMEs.
Facts
- A group of 15 fintechs, including Wise, Monzo, Revolut, and Klarna, have composed an open letter to UK chancellor Jeremy Hunt.
- The letter highlights the widespread practice of firms displaying currency conversion services as having “zero fees” or “0% commission,” but in reality, they embed a charge ranging from 2.5% to 3.7% over the mid-market rate for transfers to EUR or USD with UK high-street banks.
- This hidden charge is not communicated to the customers, leading to UK consumers and SMEs losing a total of £5.6 billion in hidden FX fees in 2022 alone.
- The current rules prevent UK customers from accurately calculating the total cost of their transactions or comparing costs.
- The fintech group urges the government to address the issue in the ongoing Payment Services Regulations (PSRs) Review and utilize post-Brexit freedoms to become a global leader in transparency for consumer savings on international money transfers and business trading.
- Proposed steps to fix the issue include displaying the total cost of currency conversions upfront, including any mark-up or margin over the mid-market exchange rate, and mandating companies to use an aggregated mid-market rate issued by an FCA-approved neutral provider.
- The group also recommends that HM Treasury instruct the FCA to issue guidance on what constitutes a “currency conversion charge” and update guidance in the Consumer Duty to provide clear examples of how firms should behave regarding currency conversion services.
- The revisions to the PSRs and FCA guidance will ensure that fees are transparently shown to consumers before their transactions, ultimately saving consumers and SMEs billions.
