Fifteen of London's biggest fintech companies, including Wise, Revolut and Monzo, have come together to demand an urgent review of legislation regarding hidden bank fees for international payments.
In an open letter to the Chancellor Jeremy Hunt, the fifteen signatories claim that consumers and SMEs in the UK lost a total of £5.6 billion in mostly hidden foreign exchange fees in 2022, and current ambiguous legislation allows major providers to keep earning profits through these hidden fees.
"There is widespread practice of firms showing currency conversion services as have ‘zero fees’ or ‘0% commission’," the letter continues. "This is highly misleading when a much larger charge is embedded in the exchange rate, ranging from 2.5% - 3.7% over the mid-market rate for a transfer to EUR or USD with a UK highstreet bank, but this is never communicated to the customer."
The letter urges the Chancellor to address the issue in its ongoing Payment Services Regulation review. The fintechs behind the appeal - which also includes Truelayer, Teya, PayPlan, Seedrs, NCFX, Fairer Finance, Startup Coalition, GoCardless, SumUp, Fire, and Plum - have made a list of five demands:
1. The total cost of currency conversions needs to be shown up front to consumers and SMEs before they make a payment.
2. The legal definition of a ‘currency conversion charge’ should include any mark-up over the mid-market rate.
3. Firms must use an aggregated mid-market rate issued by a neutral provider (e.g. Bloomberg, Refinitiv, New Change FX), which is approved by the Financial Conduct Authority (FCA) as an official mid-market rate provider.
4. These rules need to apply to global currency conversions to support Global Britain, and not just to EU currencies.
The letter also instructs how the Treasury can support the FCA in removing vague wording, and ensuring all companies are clear on the rules they should abide by.
Magali Van Bulck, head of Emea policy at Wise, said: “Hidden fees in foreign transactions simply shouldn’t exist in 2023. Burying additional costs in inflated exchange rates and labelling these as ‘zero fee’ is having a detrimental effect on the finances of people and businesses across the UK. In light of the Consumer Duty coming into force at the end of the month, this is completely unacceptable and a textbook example of how firms are not “providing fair value to customers.”