Stop The Exchange Rate Ripoff Report

Nicholas Lembo

Hidden exchange rate markups estimated to cost Americans $8.7 billion in 2019

Consumers and businesses lose billions every year when they send and spend money internationally and most are unaware they are losing out. Wise was founded to solve this problem.

We recently commissioned independent research (full methodology here) to understand how Americans are affected by the lack of transparency in international payments.

Capital Economics estimates that American consumers and small businesses paid over $16.3 billion in 2019 on foreign exchange. Of this, roughly $7.6 billion are shown as transaction fees, but more than half - about $8.7 billion - are hidden in exchange rate markups and various fees for card usage abroad.

A few groups of Americans are particularly badly hit by these hidden fees.

  • Consumers sending money to friends and family in other countries (also known as remittances) spent more than $7.3 billion in 2019 to move their own money, of which $2.2 billion is hidden in exchange rate markups
  • Individuals with investments abroad lost $1.6 billion in 2019 on their returns due to hidden exchange rate markups
  • Small businesses spent more than $2.4 billion in 2019 on foreign exchange, of which $2.3 billion is hidden in exchange rate markups!
  • Travelers on vacation spent more than $3.2 billion in 2019 in fees on foreign exchanges, and $2.1 billion of that is hidden in exchange rate markups.
  • US military service members spent more than $455 million on foreign exchange fees in 2019, and $301 million of that went to line the pockets of bank and brokers in the form of exchange rate markups

Sadly, these findings confirm that Americans are not immune from getting ripped off on exchange rate markups.

Lack of transparency creates confusion and costs consumers

This status quo persists because most people don’t ever realize their international payment comes with a hidden fee in the form of an exchange rate markup.

To determine the actual cost of an international transaction, consumers have to conduct a complex calculation:

  • Multiply the provider’s exchange rate with the amount they’re transferring
  • Add any upfront costs the provider charges
  • Repeat the same exercise using the real (mid-market) exchange rate you find on Google.
  • The difference is the actual, total ‘cost’ of an international transaction

This task is time-consuming and difficult. The complexity of the calculations required - along with the fact that the exchange rate markup is rarely stated and a reference rate is almost never provided - make it nearly impossible to shop around with different providers.

Banks and money transfer rate providers make it hard to understand exactly what you’re paying for. When it’s not clear what your costs really are, providers can charge whatever they want.

This lack of information in international payments is exploited by banks to conceal significant revenue in exchange rate mark-ups and it adversely affects consumers and small businesses.

Consumer awareness of hidden fees

We also commissioned YouGov to conduct a consumer survey analyzing Americans’ awareness of how international payments pricing works. YouGov found that 55% of US adults who have sent money abroad said they understand how much they paid in fees.

However, when presented with the most common forms of fee structure that banks and other providers give consumers, only 9% of consumers could identify that the full cost is composed of both an upfront fee and an exchange rate markup.

When presented with a real world example in cold hard numbers, only 20% of respondents could accurately identify whether or not they had enough information to determine the total cost of a payment.

These findings held true for all age ranges, income groupings, and levels of education.

What’s the solution?
Transparent pricing for international payments will help stop these hidden exchange rate markups and help save billions for consumers.

We are asking Congress to end the lack of transparency that costs Americans over $8.7 billion a year.

Sign the petition here

Please see terms of use and product availability for your region or visit Wise fees and pricing for the most up to date pricing and fee information.

This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.

We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.

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