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The Council of Small Business Organisations Australia (COSBOA) is calling on the Australian Competition and Consumer Commission (ACCC) to take stronger action following the release of the ACCC’s report on international money transfers (IMTs). The report reveals that better transparency can reduce IMT costs, suggesting that switching providers could save consumers over $200 million annually. However, COSBOA believes that further measures are needed to support small businesses and consumers alike.
The ACCC’s draft update includes a new ‘Best Practice Guidance’ for IMT providers, which mandates that providers subtract the fixed fee component from the amount being transferred, standardising fee structures across the industry. While this is a positive development, COSBOA’s CEO, Luke Achterstraat, argues that it falls short of addressing the broader issues.
“The ACCC’s changes will help consumers and small businesses who compare options to make like-for-like comparisons. But with over 40 per cent of consumers not comparing, this update does little to encourage them to seek better alternatives,” Achterstraat said. “The proposed rules are a minor improvement but do not sufficiently address the needs of those who are too busy or lack understanding of the foreign exchange market.”
The impact of non-transparent pricing and foreign exchange (FX) margins can be particularly significant for small businesses. For instance, the ACCC found that consumers and small businesses using the most expensive bank in February 2024 to transfer the US dollar equivalent of A$10,000 could have saved more than A$400 by choosing the cheapest IMT provider in the sample.
High transfer fees can make small businesses less competitive, especially when compared to larger enterprises that can negotiate better rates or access more cost-effective services. Unfavourable exchange rates can also lead to cash flow issues, complicating financial management for small businesses.
COSBOA is calling on the ACCC and the government to take their own advice and include examples of FX margin costs in Australian dollar terms. This would simplify IMT comparisons, encouraging more Australians to shop around for the best deals, potentially reducing the $200 million annual cost currently borne by consumers.
“Despite recommendations from the Behavioural Economics Team of the Australian Government (BETA) and the ACCC’s acknowledgment that the current system costs consumers at least $200 million annually, the ACCC is deflecting key findings and calling for more consultation from banks and the payments industry — sectors that benefit from FX margins,” Achterstraat continued. “We want the importance of lowering FX prices for small businesses to be recognised and acted upon.”
COSBOA is urging the ACCC to prioritise the implementation of these reforms to ease financial pressures on small businesses and foster a more competitive and transparent market. “We call on the ACCC to act now and not delay these essential reforms. Small businesses need relief, and they need it now,” concluded Achterstraat.
For more information about COSBOA, visit www.cosboa.org.au.
Last Updated on August 9, 2024 by Nick Ross
