It’s fair to say that banks have rarely been noted as the guardians of consumer fairness. After all, they are businesses looking to turn a profit on their customers.
However, when it comes to the typically high costs that banks charge on cross-border currency transfers, (even between EU Member States) or on cash withdrawals to people abroad, the European Commission is looking to crack down on potentially unfriendly terms for consumers.
The Commission is tackling the issue with a public consultation on the topic — which will run until the end of October — that will look at both the cost of a transaction and the cost of currency conversion, by gathering views from a wide range of parties.
“I want to make sure that all Europeans pay less when transferring money abroad or taking money out of cash machines during their holidays – no matter which currency they use or where they are in the EU,” said Valdis Dombrovskis, the Commission vice president.
It is a sentiment shared by many and the Commission is not the first to highlight the issue.
Over the past few years, more and more FinTech start-ups have come to market, including TransferGo, offering cheap and fast cross-border transfers for much lower costs than traditionally charged by banks.
The public has responded well to the myriad new money transfer options, many of the new FinTech companies have grown exponentially as peoples’ confidence in alternative options has grown.
The Commission’s consultation document on the topic, states: “Currency conversion rates are often not transparent for consumers when making credit transfers or when paying with a card or a mobile device in a shop, or when withdrawing money from an ATM, in a country with another currency than that of the consumer’s home country.”
Transparency is a key part of the debate and something that has riled the public for many years.
It is the gap that myriad start-ups spotted and wasted no time in capitalising on. A combination of transparent costs, easy-to-use services, and small fees and exchanges rates has helped with the growth in the sector.
TransferGo, for example, charges a fixed fee — such as 99p from the UK — dependent on the country you are sending money from, and between 0.4% and 1.5% commission on the foreign exchange. There are no grey areas, which struck a chord with consumers.
On the other hand, the Commission consultation document states that “EU citizens who need to make transactions that involve EU currencies of EU Member States other than the euro still face major costs and obstacles which stand in the way of a deepening of the internal market.”
Until recently, consumers had little choice but to fall victim to the unfair practices of banks.
This debate is long overdue, and it could pave the way for EU-wide legislation that finally puts consumers first — something that tech companies have been keen to do from the start.