Especially because this regulation in particular has the potential to put a stop to hidden fees – and finally force banks and other financial services to disclose exactly what it costs for you to send money across Europe.
But examples like Natwest’s show that neither new regulation, nor guidelines (or the principle of doing the right thing), suffice to make banks become more transparent. So far, the implementation of CBPR2 has been more than patchy or ignored altogether.
The bottom line is: banks are still taking advantage of the pandemic, the vagueness of the legislation, and consumers’ unawareness.
That’s why we’re campaigning to enforce the rules in the way they were intended. So, we’re writing this series of blogs to look into how transparent banks and other FX providers are, based on the following criteria:
- The exchange rate used vs the real exchange rate;
- Disclosure (and visibility) of the mid-market rate;
- Disclosure (and clarity) of how much extra you’re paying.
Next up is HSBC.
HSBC isn’t just one of the biggest banks in Europe. It’s the biggest.
It’s also one of the biggest in the world. So you’d think that they’d make international transfers as easy, cheap and transparent as can be.
Well, they don’t. 👇
Calculating the price of an international transfer shouldn’t be complicated maths. In fact, it’s quite easy:
Exchange rate spread + upfront fee (to cover costs of your transfer and, maybe, a profit) = what you should pay
However, banks have historically made it hard for users to understand this. That’s because it’s been proven that, if customers understand the breakdown of their transfers, they’re more likely to choose the best deal. And most of the time, the best deal isn’t with their bank.
HSBC is clearly no exception to the rule.
Above is the rate HSBC customers were offered at the time of their international transfer during the last week of September. And on the left, is the real exchange rate. This is commonly called the mid-market rate, and it’s something you can check on independent websites such as XE, Bloomberg or Google. Also, unlike bank exchange rate, they’ll all be the same at the time you check them. Because they’re not, say, fictitious.
In this case, HSBC states that the exchange rate is 1.05. Google states it’s 1.09. They can’t both be right.
Let’s do some more quick maths:
1,090 - 1,050 = 40
Those lost €40 equal the markup amount, HSBC’s profit in hidden fees embedded into their exchange rate. And unfortunately, most people aren’t aware of this hidden fee.
And €40 isn’t exactly a small fee: think of all the croissants, tapas, arancini — whatever your European heart desires — could have been bought with that.
Anyways. The verdict is: HSBC is not transparent, because it overcharges customers by giving them bad exchange rates for their own profit.
The visibility of the mid-market rate is important because it gives you the reference point of how much your transfer should be worth.
In this transfer, HSBC claims that they are providing the “HSBC exchange live rate” (whatever that is) which corresponds to a “live indicative rate”, without ever explaining what that rate entails. It also mentions that it “may change” — which only adds to our puzzlement.
So we went out looking for answers on HSBC’s website…
No luck there either. Mind you, we also looked for what the HSBC Exchange Rate means – nothing. One of our Product Managers went a little further and called CS asking for the same answer – also nothing. If you have any idea, please let us know.
So it’s a no for disclosure of the mid-market rate as it’s nowhere to be found.
Just to recap. So far, we were offered an inflated exchange rate, and at no point is the exchange rate ever explained.
HSBC does state on their website that they charge for international transfers for their non-premium accounts and when it's not between HSBC accounts.
But that’s only a £4 (or £9 in person) fee on top of your transfer, which is on top of the €40 you’d have already paid in the “HSBC Exchange Rate”.
With a markup of 3.89% is steep, but definitely not the worst example in terms of exchange rate inflation we’ve seen so far.
- Considering its size, and the number of customers it serves, the scale at which they’re ripping people off is arguably bigger than any other bank;
- The lack of disclosure of fees, prices and exchange rates, demonstrates its unwillingness to change its ways and live up to the expectations of the thousands of international users that bank with them.
- Plus, it’s in violation of what they’d promise in their own CBPR2 page.
This is another prime example of how we're concerned about legislation like CBPR2. Without clear rules or clear deadlines, banks and providers will continue to hide the total cost and pocket the profits.
HSBC isn’t alone
Change is coming — but unless we call out the biggest offenders of CBPR2, banks will never be transparent. So help us make transparency the norm.
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