You are here

UK small business euro transfers cost 4 billion pounds a year: study

[LONDON] Small businesses in Britain that trade with the euro zone spend nearly 4 billion pounds (US$5.8 billion) a year transferring money abroad, partly because a lack of transparency makes it tough for them to get the best deal from banks, a study showed on Tuesday.

Britain has been trying to increase competition in banking and reduce the dominance of its major banks, which include Lloyds Banking Group, Royal Bank of Scotland, Barclays and HSBC. "When comparing costs among banks there is no straightforward way of deciding which one is the most expensive," the study said.

The research was conducted by payments industry consultancy Accourt and commissioned by Money Mover, an online currency exchange and international payments service for small business which competes with established players.

Britain's competition watchdog reviewed the market for current accounts and small business banking in 2014 and recommended measures to make it easier for customers to compare costs.

Accourt's study said total outgoing payments to the rest of Europe by small businesses in 2014 amounted to 162.92 billion pounds.

The study found that 96 per cent of the revenue for a bank on a 75,000 pound transaction within the EU came from a margin added to the money market exchange rate, known as the spread, but this was not disclosed to the customer. "We can conclude that on average banks are charging a total 2.43 per cent of the value transferred which equates to a value of 3.96 billion pounds," the study showed.

Accourt said it researched six of Britain's major banks to find the costs of making an international transfer. It also interviewed the banks to obtain its findings.

It asked each bank questions on fee structure and spread and charges for payments for different transaction sizes, from under 10,000 pounds to more than 100,000 pounds. Its analysis focused on euro transactions for comparison purposes.

Accourt said it was difficult to assess which banks charged the most for foreign currency transfers partly because of the volatility of the foreign exchange market.

Also, Accourt said a lack of transparency on how banks calculated the exchange rates meant the study could not produce"definitive conclusions" on which was the most expensive bank.

Accourt gave some examples of bank charges in its study. Based on an average transaction size of 75,000 pounds, Barclays'total transaction cost was 2,776 pounds, Lloyds' 2,047 pounds and NatWest, part of RBS, 1,799 pounds, Accourt said. "We wholeheartedly disagree with the figures used in this survey - they are not an accurate reflection of the rates offered under a comparison scenario and we would challenge the robustness of the methodology," a Barclays spokesperson said.

Royal Bank of Scotland had no comment. Lloyds did not immediately respond to a Reuters' request to comment.