Australian Competition Commission Launches Inquiry into Foreign Currency Conversion Services
The Australian Competition and Consumer Commission (ACCC) has announced that it is opening an investigation into price competition among suppliers of foreign currency conversion services. The inquiry will examine the ways in which exchange rates are presented to customers, as well as the mark-up from wholesale currency rates that buyers are charged when changing currencies.
According to ACCC Chair Rod Sims, "The exchange rate you Google is not the exchange rate you get from the Big Four banks. The difference is known as the ‘mark-up’, and it’s often a big part of the price consumers pay when converting currency." Sims also stated that the inquiry will look into why major companies in Australia, including the Big Four banks, seem to be able to consistently charge high prices.
The Impact of Foreign Currency Fees on Australian Consumers and Businesses
A 2017 study by consultancy Capital Economics found that Australian consumers and businesses paid out about A$3.9 billion ($2.82 billion) in foreign currency fees in 2016. Of this total, more than A$3.1 billion was in exchange rate mark-ups and card spending charges applied by banks and brokers to international transactions.
This figure highlights the significant impact that foreign currency fees can have on Australian consumers and businesses. The ACCC’s investigation into price competition among suppliers of foreign currency conversion services is likely to shed further light on this issue and help to identify ways in which costs can be reduced for consumers and businesses.
The Royal Commission Inquiry into Australia’s Big Banks
In recent years, a powerful Royal Commission inquiry into Australia’s big banks and wealth managers has shone a harsh light on financial institutions in the country. The inquiry has revealed widespread misconduct and deception of customers by major banks, including the Big Four banks that are being investigated by the ACCC.
The Australian Banking Association has described the interim findings of the Royal Commission as "a day of shame for Australia’s banks" with "no excuses for the behavior that has been exposed". This scandal has led to widespread calls for greater transparency and accountability in the financial sector, and the ACCC’s investigation into foreign currency conversion services is likely to be influenced by these broader concerns.
The Cost of Sending Money Overseas from Australia
A World Bank report published in June found that the cost of sending money overseas from Australia was higher than both the Group of 20 nations and global averages. The report highlighted the significant costs associated with remitting funds between countries, including exchange rate mark-ups and other fees.
Australia has a large migrant population, and the country’s migrant remittance outflows were estimated to be around $6.36 billion in 2016. This figure highlights the significant impact that foreign currency fees can have on individuals and families who rely on international remittances.
The ACCC’s Investigation into Foreign Currency Conversion Services
The ACCC will submit its final report to the Treasurer by May 2019. The investigation is likely to shed light on the complex issues surrounding price competition among suppliers of foreign currency conversion services, as well as the impact that these fees have on consumers and businesses.
As part of its inquiry, the ACCC may also examine the role of major banks in setting exchange rates and charging mark-ups, as well as the ability of potential entrants to compete in this market. The investigation is likely to be influenced by broader concerns about transparency and accountability in the financial sector, and may lead to recommendations for reforming the way that foreign currency fees are charged.
Conclusion
The ACCC’s investigation into price competition among suppliers of foreign currency conversion services is an important step towards reducing the costs associated with international remittances. By shedding light on the complex issues surrounding exchange rates and mark-ups, the inquiry has the potential to benefit not only consumers and businesses but also the broader economy.
As the world becomes increasingly interconnected, the ability to send money across borders is becoming more critical than ever before. The ACCC’s investigation into foreign currency conversion services will help to ensure that this process is fair, transparent, and efficient for all stakeholders involved.