Most Aussie SMEs overpay for international money transfers

Research from Money Transfer Australia has found that 62 per cent of Australian SMEs conduct their international trade through the big four banks despite higher exchange rate mark-ups and fees.

The study, which surveyed an independent panel of 200 Australian SME owners and decision-makers, revealed significant insights into how these businesses manage their international transactions.

The survey found that the larger the business, the more likely it is to use the same bank consistently for international money transfers. Specifically, 74 per cent of businesses with more than 200 employees use the big four banks, compared to 68 per cent of those with 11-50 employees and 45 per cent of micro businesses. Additionally, larger businesses (42 per cent) are less likely to switch providers than their smaller counterparts (25 per cent).

Money Transfer Australia's survey suggests that these SMEs might be potentially overlooking an expense that could be costing them thousands of AUD each year. Despite higher prices, lower consumer spending, and tightening profit margins, a substantial number of businesses remain committed to traditional banking channels.

The Australian Competition and Consumer Commission (ACCC) recently released a report highlighting that international money transfer fintechs offer better prices than the big four banks, even after the latter reduced or removed flat fees on transfers over the past five years. For every AUD $20,000 exchanged through the banks, businesses could be paying up to AUD $850 extra, compared with as low as AUD $100 through a non-bank money transfer provider.

The research also found that familiarity and trust play significant roles in these decisions. More than half (51 per cent) of the respondents said they trusted banks more, and almost a third (31 per cent) preferred having access to 'people on the ground' in Australia over an online service, which might potentially have offshore support staff. Moreover, 30 per cent of the respondents indicated that they do not like switching to new service providers that they are unfamiliar with.

Interestingly, the survey results revealed a strong awareness among SMEs about the costs associated with international transactions. A notable 88 per cent of SMEs are aware of the fees they pay for these transactions, and 89 per cent understand the currency exchange mark-ups. Additionally, 91 per cent of the respondents check fees and mark-ups before transacting.

Alon Rajic, founder of Money Transfer Australia, commented on the findings: "In 2023-2024, Australian businesses closed down at almost the same rate as new ones opened. In the volatile economy of the past few years, it makes good sense for businesses to identify where they could further cut costs. In the current economy especially, it is understandable that business owners want to stick with a money transfer service they know and trust. What many people don't understand is that some non-bank money transfer specialists, such as TORFX and OFX, have been in business for as long as 20 to 25 years. They are ASIC authorised, well-established, and reputable.

"Being complacent about bank fees or fearful of change can cost a business. Specialist providers don't charge extra fees and offer exchange rates well below the going mid-market rate. It pays to shop around."

The full survey results, including breakdowns across different business sizes and states, are available on the Money Transfer Australia website.