Over a third of SME overheads in Scotland are spent on international banking fees

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

• International payment fees of Scotland-based SMEs are equivalent to hiring 15 full-time employees**

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

Across Scotland, it is estimated that the average business spends £417,585 on international payment fees – this is even higher than the North of England where the average was £414,068.

The survey, conducted by Censuswide with 1,500 SMEs across the North of England and Scotland, showcased the struggles for smaller to medium sized enterprises when it comes to business expansions, 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 almost a third (31%) of Scottish SMEs are put off from operating internationally, due to the high costs of international banking services.

Given fraught international conditions when it comes to overseas banking, over a quarter of SMEs in Scotland (27%) 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, commented: “The data clearly outlines the hugely negative impact that sending and receiving money internationally via traditional banking methods is having on businesses based in Scotland. 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 almost a quarter of SMEs (24%) 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

Dr Lisa Cameron, MP for the Scottish National Party, commented: “On top of the cost-of-living crisis, I was aghast to discover from this vital research that so many small business owners in my constituency are also facing hidden banking fees and charges. These issues must be made transparent to all business owners and commitments made by banks to minimise the financial struggles of already stretched SMEs across the UK.”

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