An open letter to stop hidden fees. Signed by industry.

Chancellor of the Exchequer
HM Treasury
1 Horse Guards Road
London
SW1A 2HQ

Dear Chancellor,

We are writing to you to take this opportunity to stop hidden fees in cross-border payments once and for all.

Private research shows consumers and SMEs in the UK lost a total of £5.6 billion in mostly hidden FX fees in 2022 alone. Yet there is widespread practice of firms showing currency conversion services as have ‘zero fees’ or ‘0% commission’; this is highly misleading when a much larger charge is embedded in the exchange rate, ranging from 2.5% - 3.7% over the mid-market rate for a transfer to EUR or USD with a UK highstreet bank, but this is never communicated to the customer.

We should be delivering better outcomes for people and businesses. The Government should utilise its post-Brexit freedoms to take a leading role on the global stage, becoming the first country to power savings for consumers sending money abroad or businesses trading internationally through transparency. The Government should take this opportunity to address this immediately in its ongoing Payment Services Regulations (PSRs) Review.

What the Government must do to solve the problem

In the revised PSRs, HM Treasury should:

• Ensure that the total cost of currency conversions is shown up front to consumers and SMEs before the initiation of a payment - including any mark-up or margin over the mid-market exchange rate.

• Ensure that the legal definition of a ‘currency conversion charge’ includes any mark-up over the aggregated mid-market rate.

• Mandate firms to use an aggregated mid-market rate issued by a neutral provider (e.g. Bloomberg, Refinitiv, New Change FX), which is approved by the Financial Conduct Authority (FCA) as an official mid-market rate provider.

• This should apply to all global currency conversions to support Global Britain, and not just to EU currencies which was the basis of the Cross Border Payments Regulation (CBPR2).

HM Treasury should also instruct the FCA to:

• Issue guidance on what constitutes a ‘currency conversion charge’ and include a mark-up over the mid-market exchange rate, to support the strengthened legal definition as above.

• Issue updated guidance in the Consumer Duty with a clear example box of how it expects firms to behave when it comes to currency conversion services, and require firms to show total cost upfront in a single amount to the consumer. That way, transparency in currency conversion costs will be explicit and clearly enforceable by the regulator. This would be in keeping with the FCA’s best practice guidance in BCOBs 2.3.7.c and is appropriate for the UK market.

It is important that customers know exactly what they are paying. These revisions to the PSRs and FCA guidance will ensure that these fees are shown upfront to consumers before they part with their money. This will allow consumers to effectively comparison shop: most consumers are currently faced with banks showing their own, inflated, exchange rate, without disclosing the mark-up against the mid-market rate, making comparisons almost impossible for the average consumer. In effect, this means UK customers are not able to accurately calculate the total cost of their transaction or compare costs.

The Government must address this immediately to save consumers and SMEs billions, and reform the cross-border payments industry once and for all.

We the undersigned look forward to hearing from you on this matter.