Source: Australian Competition and Consumer Commission
People who use foreign currency conversion (FX) services now have greater access to accurate online calculators to help compare prices, but the ACCC says greater transparency is still needed at a time when many Australians are sending money to family and friends overseas.
The ACCC’s Foreign currency exchange services inquiry report, released in September last year, found many Australian consumers were paying too much for FX services.
ACCC Chair Rod Sims noted at the time that, “shopping around could save Australian consumers hundreds of millions of dollars each year”. The report found that for just two currencies, US dollars and UK pounds, individual consumers who used the big four banks to send international money transfers (IMTs) could have collectively saved about AUD150 million in 2017-18 if they had instead used a lower priced IMT supplier.
One of the major issues the report identified was that many of the online calculators available to consumers to calculate foreign currency conversions did not include the full price of FX transactions, including fees. Further, some suppliers did not even make an online calculator available to consumers looking to find price information.
Following the ACCC’s intervention and subsequent review this year, more than half of the 26 prominent online FX suppliers reviewed now have an online calculator on their website or improved their existing calculator. This will make it easier for consumers looking to compare the total price of FX services from different suppliers.
“We’re very encouraged that many foreign currency suppliers have already made improvements to their online calculators and websites to make it easier for consumers to shop around when comparing the cost of converting foreign currency,” Mr Sims said.
“It is even more important during the COVID-19 pandemic, and at a time of growing unemployment globally, that consumers are able to easily compare fees and other charges when converting currency and sending it to family or friends overseas.”
Several of the suppliers reviewed have said they are working to meet the ACCC’s guidance. The ACCC will continue to engage with those suppliers it considers to be falling short of best practice.
“We do want to see all foreign currency service providers, not just some, lift their game so that consumers can benefit from greater price transparency and ultimately competition,” Mr Sims said.
The ACCC’s report also included best practice guidance for FX suppliers to improve how prices are displayed in stores, to make them more accurate and easier to understand and compare. The ACCC will resume engagement with the sector on this issue as COVID-19 restrictions are lifted and suppliers return to normal operations.
“If we find that this industry is not adopting our best practice measures or even that businesses are moving away from them, we will work with the Government on further measures to ensure consumers have access to this important information,” Mr Sims said.
About the guidance to the FX industry on price disclosure
The ACCC’s report included best practice guidance on how businesses supplying FX services should disclose prices to consumers. The guidance focuses on ensuring that businesses clearly disclose the full price of a FX service to consumers upfront.
The ACCC put forward the best practice guidance to address the combination of complex price structures and a lack of price transparency which it found to be:
- limiting the ability of Australian consumers to realise the hundreds of millions of dollars they could be collectively saving each year by shopping around, and
- harming competition by making it difficult for consumers to compare the prices offered by different suppliers and to make informed decisions about FX services.
Guidance for consumers using international money transfers
IMTs are regularly used by groups of potentially vulnerable and disadvantaged consumers such as migrants and temporary workers, some of whom may be sending more frequent or larger IMTs due to COVID-19.
The ACCC’s Consumer guide to FX services includes information for these and other consumers aimed at ensuring they can get the best value for money when sending an IMT.
On 2 October 2018, the Treasurer approved the ACCC holding an inquiry into the supply of FX services in Australia. On the same day, the ACCC released an issues paper for the inquiry. In response, the ACCC received 63 written submissions from a mix of consumers, FX services suppliers, small businesses and other stakeholders.
The final report was released on 2 September 2019 and focused primarily on IMTs. IMTs are significant for a number of reasons including:
- prices in Australia are high by global standards and IMTs are a significant outlay for Australians with an estimated AUD21 billion in personal IMTs sent from Australia each year
- IMTs are regularly used by groups of potentially vulnerable and disadvantaged consumers such as migrants and temporary workers
- the average transaction size for IMTs is much larger than the other services considered in the inquiry.
This inquiry was the second undertaken by the ACCC’s Financial Services Competition Branch (FSCB). The FSCB proactively monitors and promotes competition in Australia’s financial services sector by assessing competition issues and undertaking inquiries such as these.