Over a third of SME overheads in the North of England are spent on international banking fees

  • New research by Wise has revealed the reality of international payments for SMEs in the North of England and what this means for expansion plans

  • International payment fees of SMEs in the North of England are equivalent to hiring 15 full-time employees

Wise has today released new research which reveals that North of England-based SMEs spend an estimated third (34%) of their overheads on international payment fees when using traditional banks. The survey also included SMEs in Scotland which found that Scottish SMEs spend an estimated third (35%) of their overheads on international payment fees.

Across the North of England, it is estimated that the average business spends £414,068 on international payment fees. This is particularly alarming in Leeds city, who spend 6% over the average on this business expense.

The survey, conducted by Censuswide with 1,000 SMEs across the North of England, showcased the struggles for smaller to medium sized enterprises when it comes to business expansion, given the expense of international payment fees as a result of sending and receiving payments via traditional banks.

It is therefore unsurprising to learn that high numbers of North of England-based SMEs are put off from operating internationally, due to the high cost of international banking services (30%), exchange rate volatility (25%), and the inconvenience of traditional banking services (25%).

Given fraught international conditions when it comes to overseas banking, over a quarter of SMEs across the North of England (28%) claimed that exchange rate volatility had been one of their biggest challenges and a barrier to success over the last year.

Jack Maddock, Senior Product Manager at Wise, said: “The data clearly outlines the hugely negative impact that sending and receiving money internationally via traditional banking methods is having on businesses based in the North of England. Whilst banks often profess their support and claim to champion SMEs, it’s clear to see this is a vanity project, and far outside of reality.

“With a quarter of SMEs (25%) surveyed planning to expand overseas within the next 12 months, it’s incredibly concerning to see the extent to which international banking fees are impacting their success and potential for growth. We need to ensure that more is done to support businesses in this situation.

“At Wise, we’re pushing for businesses to be able to transact anywhere seamlessly. That means money without borders: moving it instantly, transparently, conveniently, and eventually for free. Using a digital transfer platform such as Wise allows businesses to manage money globally, built to save money and time, so business owners can spend more time focusing on growing their business.”

What needs to change?

Wise is calling on the Government to tighten existing regulations to make fees clearer and the market more competitive so that SMBs have the knowledge they need to make educated financial decisions.

Existing legislation, such as the Cross Border Payment Regulation 2 (CBPR2), states that banks should make fees clear when business customers trade in Euros, however this is often being ignored or circumvented by banks via fees hidden in marked up exchange rates.

The situation is even worse for businesses trading overseas outside of the EU, which is particularly alarming given that a third of SMEs in the North of England and Scotland with expansion plans overseas are targeting North America as the priority market. The Payments Services Regulation (PSRs), currently under review, are clear in their aim to achieve greater transparency, but due to vague language and banks having the option of a ‘corporate opt out’ when dealing with business customers, SMBs are the ones to suffer.

Wise is therefore asking the Financial Conduct Authority (FCA) to:

  • Better enforce CBPR rules and provide additional guidance to banks so their intention to ban hidden fees rules is respected
  • Ensure that, as part of it PSR review, all payments overseas are subject to transparency, with banks forced to make fees clear
  • End the ‘corporate opt out’, which penalizes SMBs for no good reason

What do our business customers say?

Simon Fretwell, Founder at RedboxVR, based in the North West, said: "After being recommended by a trusted supplier of ours in France, we use Wise for international bank transfers and small balances. RedoxVR’s journey began in 2016, with a clear focus on providing VR kits for educational purposes. As time went on, we earned the prestigious position of being the UK manufacturing partner for Google Exhibitions software, propelling us into new markets and ventures.

“From our main office in Blackpool and our established factory in Manchester, our influence now reaches far beyond the North West of England. Operating in Europe, the US, and the Middle East, we've established strategic partnerships with resellers to cater to diverse markets and sectors.

“Due to supply chain challenges, we are now further streamlining our operations by embarking on exciting new ventures in different markets. A new office and hub in Gothenburg, Sweden, is in the works, and we’re also exploring the possibility of establishing a presence in Southern Europe.

“Our partnership with Wise has revolutionised the way we manage our finances. With reduced costs and expedited processes, Wise has alleviated the challenges we once faced with banks, where delays often hindered our operations. Wise has undoubtedly played an important role in our success story.”

Today, Wise has more than 400,000 active business customers - and 16 million customers in total. See our homepage for more information on Wise, or to set up an account.

*Research conducted by Censuswide of 1,500 SMEs based in the North of England and Scotland

For more information, contact the Wise North of England and Scotland press team on wise@hatch.group

This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from Wise Payments Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.

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