Despite higher prices, lower consumer spending and tightening profit margins, the majority of small-to-medium businesses are overlooking an expense that could be costing them thousands over a year, according to new research from comparison platform, Money Transfer Australia.
Almost two-thirds (62%) of those surveyed are conducting international trade through the big four banks this year, despite generally higher exchange rate mark-ups and fees than specialist money transfer providers.
Recently, the ACCC released a report that revealed international money transfer fintech’s offer better prices than the big four banks, even after the latter removed or reduced flat fees on transfers in the last five years.
For every $20,000 exchanged through the banks, businesses could be paying up to $850 extra, compared with as low as $100 through a non-bank money transfer provider.
Despite this, 62% of business owners continue to do international trade through the big banks, and an additional 14% transact through a smaller bank. Further, almost one-third (31%) say they always use the same bank or provider.
The survey also found that 88% of SMEs know how much they are paying in fees when they transact internationally, and 89% know how much they are paying in currency exchange mark-ups. Nine in 10 (91%) check the fees and mark-ups payable before they transact.
Money Transfer Australia found that the larger the business, the more likely they are to use a bank for international money transfers. Three-quarters (74%) of those with more than 200 employees use a big-four bank, compared with 68% of those with 11 to 50 employees and 45% of micro businesses.
The larger the business, the more likely it is to also use the same bank or provider – specifically, 42% of large businesses, 33% of small and medium-sized businesses and just 25% of micro businesses. Similarly, larger businesses are more likely to understand less how much they are paying in fees and currency exchange mark ups. Small businesses (11-50 employees) paid more attention to the extra fees.
With just 7% of respondents admitting they transact through a specialist money transfer provider, Money Transfer Australia asked respondents why they conduct foreign trade through banks.
Trust and local presence were the most common reasons. More than half (51%) of respondents said they trusted banks more and almost a third (31%) said they prefer to have access to ‘people on the ground’ in Australia over an online service, which potentially offers support staff offshore.
Close to one in three (30%) don’t like to switch to new service providers that they are not familiar with. A small percentage (15%) get preferential rates through their bank, and a similar proportion (14%) simply like to do all their banking in one place.
Money Transfer Australia founder, Alon Rajic said, “In 2023-2024, Australian businesses closed down at almost the same rate as new ones opened. In the volatile economy of the past few years, it makes good sense for businesses to identify where they could further cut costs.
“In the current economy especially, it is understandable that business owners want to stick with a money transfer service they know and trust. What many people don’t understand is that some non-bank money transfers specialists, such as TORFX and OFX, have been in business for as long as 20 to 25 years. They are ASIC authorised, well-established and reputable.
“Being complacent about bank fees or fearful of change can cost a business. Specialist providers don’t charge extra fees and offer exchange rates well below the going mid-market rate. It pays to shop around.”