Confusing pricing structures and a lack of robust competition is resulting in Australians paying too much for foreign currency conversion (FX) services, according to a new ACCC report.
The ACCC found that it can be challenging for consumers to shop around and make informed decisions about FX services. As a result, many consumers continue to use the big four banks for FX services despite the availability of much cheaper alternatives.
It is difficult for consumers to compare prices because some suppliers do not disclose their total price up front. In addition, consumers pay unexpected fees for some services. Finally, complex prices can deter consumers from shopping around because of the time and effort required to do so.
During 2017-18, individual consumers who used the big four banks to send IMTs in US dollars and British pounds could have collectively saved about AUD150 million if they had instead used a lower priced IMT supplier.
"Shopping around could save Australian consumers hundreds of millions of dollars each year," ACCC Chair Rod Sims said.
"Consumers and small businesses tend to default to their usual bank to send money overseas, but this may not be the cheapest option. This is another example where consumers may end up paying more for their loyalty."
Guidance for consumers using FX services
The ACCC has released a guide which includes tips on sending money overseas, avoiding fees when making overseas purchases online, and how foreign exchange services with low or no fees are not always the best value for money.
"The guide will help consumers to shop around, carefully select where and how they pay for their purchases and to identify fees so they can get the best deal," Mr Sims said.
"We have also tried to clear up a few misconceptions, such as the assumption that paying in Australian dollars when shopping overseas is always best, when that is not the case."
The final report warns that travellers can pay a high price for leaving their purchase of foreign cash to the last minute and buying at the airport. It found foreign cash is more expensive at airport locations than at other locations. When buying USD200 in February 2019, consumers could have saved AUD40 by purchasing from the cheapest supplier at a non-airport location, compared with the most expensive supplier at the airport.
Consumers should also consider whether their existing credit or debit card may be cheaper than using foreign cash or a travel money card for overseas purchases. Some credit and debit providers offer cards with no international transaction fees which can be a much cheaper option than many other products.
Consumers should be aware that some commercial comparison sites may not be independent and that suppliers may pay for their services to be promoted by these sites. There are, however, two government-funded comparison websites for international money transfers (IMTs): www.sendmoneypacific.org and www.saverasia.com, which compare prices of IMT services available to a number of South-East Asian and Pacific Island countries.