We asked the CEOs of UK banks to stop hiding fees

The international payments industry is, for the most part, opaque. That makes it almost impossible for consumers to understand the cost of sending money abroad. At Wise, we believe that needs to change.

So, at the beginning of this year, we wrote to the CEOs of Barclays, Lloyds, TSB, Santander, HSBC, RBS, NatWest, First Direct and NationWide.

We asked them to uphold the EU’s second Directive on Payment Services (PSD2) - it mandates transparency in foreign currency transactions and states that the customer must know the real cost of transferring money abroad.

Seems like a good idea, right?

We asked them to abandon the dishonest practices of hidden charges and make their international payments fair and transparent for their customers.

You can read the full letter to Lloyds, and supporting data, at the bottom of this post. The letters to the other banks included the data relevant to them.

According to YouGov, three-quarters of people who regularly transfer money abroad miscalculate the amount they are being charged when shown a UK bank’s standard pricing structure.

Half mistakenly believe it’s free.

People have no idea what fee they are paying for foreign currency payments because the companies providing the service are not telling them in a transparent manner. That means it's impossible for consumers to easily compare service providers.

So, we were interested to hear what the banks had to say.

Six weeks after we sent the letters, we’ve had replies from three of the nine banks: Barclays, RBS and Santander. The first two wished to keep the content of their responses confidential.

Bank X’s response

Bank X returned a single line form response.

Thanks for that.

Santander’s response

Santander’s CEO Nathan Bostock passed the letter onto his executive complaints team, who returned the below.

We can confirm our belief that we seek to be clear with customers and that our policies comply with the relevant regulations. We therefore do not accept the assertions referenced in your letter.

They believe that they seek to be clear. Well, if you’re a Santander customer we hope you feel reassured. This is not about just doing enough to comply with the relevant regulations. This is about being honest with your customers.

To be clear, the ‘assertions’ in the letter are facts based on independent data.

Santander tell their customers there is an upfront fee of £25 for foreign currency payments.

Fact.

Santander then provides an exchange rate so far removed from the one you see on Reuters or Google that the customer ends up paying two to three times that upfront fee just to send £1,000 to an overseas account.

Fact.

This is data based on research undertaken for Wise by TNS 15-26th August 2016. It compares prices quoted over the phone for an online banking money transfer. This does not include any potential receiving fee.

Bank Y’s response

Bank Y sent a full page letter from their MD of Retail Banking and foreign exchange business, keen to tell us they’re committed to ensuring that customers can make an informed and rounded decision. We’ve extracted the most salient point:

I would like to confirm that [Bank Y] makes customers aware of the transaction fees we charge for international money transfers and the exchange rate that will be applied before the payment is made. This means customers can make an informed decision as to whether to make their transfer with [Bank Y] or another provider.

Independent research from YouGov shows that three quarters of people who transfer money abroad regularly can’t figure out the final cost of the transaction just from seeing an upfront fee and the bank’s exchange rate.

How can you compare costs when you have to log into online banking and go through a number of steps just to find out what the exchange rate will be?

Nice try, Bank Y.

What’s next?

We probably shouldn’t have been surprised by either the lack of responses or the lack of willingness from the banks to change and offer a better service to consumers.

But we’re disappointed.

We will continue to fight for fairness in financial services. And you can make your voice heard.
The consultation deadline for the PSD2 regulation closes on March 16th.

You can send your own response using our template.

It takes less than a minute and could end the dishonesty in this industry for good.

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The letter we sent to the Bank CEOs - Lloyds as an example:

Dear Mr Horta-Osório,

2017 is the year that we can end the opaque and dishonest practices that have become endemic in the retail banking world when it comes to international payments.

In the coming months, the EU’s second Directive on Payment Services (PSD2) will be written into UK law. It mandates transparency in foreign currency transactions and states that the customer must know the real cost and charges of transferring money abroad. This provision was included in the first Directive too but it has not been enforced to date.

I’m asking you to make your international payments fair and transparent for consumers and
to commit Lloyds Bank to implementing the Directive irrespective of what the Government decides.

Currently, you tell your customers that they only pay an upfront fee of £9.50 for international payments. In reality they pay much more. On some routes, you are charging your customer six times more than that. It’s a similar situation for UK SMEs. You tell your business customers that the upfront fee is £15. On some routes, you are charging your customer four times more than that. The detail is included at the end of the letter.

Lloyds Bank is not the only bank to do this. According to YouGov, three-quarters of people who regularly transfer money abroad miscalculate the amount they are being charged when shown a UK bank’s standard pricing structure.

People have no idea what fee they are paying for foreign currency payments because the companies providing the service - like Lloyds Bank - are not telling them.

PSD2 provides the opportunity to change this. I hope that Lloyds Bank will abandon the dishonest practice of hidden charges and do the right thing, making the cost of transferring money overseas clear to your customers.

Yours sincerely,

Taavet Hinrikus, Chief Executive Officer

Consumer sending £1,000 abroad:

Destination	Lloyds says it costs	Reuters rate	LLoyds rate	Additional charge in exchange rate	Customer pays
Germany	£9.50	1.15710	1.10570	£44.42	£53.92
USA	£9.50	1.31170	1.28580	£19.75	£29.25
India	£9.50	87.05700	83.44700	£41.47	£50.97

Research undertaken for Wise by TNS 15-26th August 2016. It compares prices quoted over the phone for an online banking money transfer. This does not include any potential receiving fee.

Business sending £2,000 abroad:

Destination	Lloyds says it costs	Reuters rate	LLoyds rate	Additional charge in exchange rate	Customer pays
Germany	£15.00	1.17450	1.15010	£41.55	£56.55
USA	£15.00	1.26840	1.23840	£47.30	£62.30
India	£15.00	85.45900	83.50700	£45.68	£60.68

Research undertaken for Wise by PCM Research 29 November - 12 December 2016. It compares prices quoted over the phone for an online banking money transfer through a business bank account. This does not include any potential receiving fee.