Fees can take big chunk of money transfer

Sunday, 21 May 2017

Fees and exchange rates vary between providers when money is sent overseas.

If you are sending money overseas, it is worth shopping around to make sure your recipient receives as much of it as possible.

A new money transfer operator, TransferWise, has entered the New Zealand market.

A spokeswoman said most New Zealanders still used major banks to transfer money overseas but this could be expensive.

'These banks charge high fees for foreign currency transactions, but the worst part is that the bulk of that cost is hidden in a poor exchange rate. This makes it difficult for people to understand what they're really being charged to send their money and to compare providers - that's not fair,' she said.

Bank fees ranged between about $15 and $25 when payments were made through internet banking.

A survey of the main international transfer providers, and the four big banks, showed that someone who sent $1000 to the United States could end up with anything from US$661 to US$687 in the recipient's bank account.

There are sometimes fees charged to the recipient by the receiving bank, too. BNZ said, in the US, the fee might be US$10 to US$20.

Banking expert Claire Matthews, of Massey University, said the banks had different exchange rates to reflect their cost of holding different types of currency. The fees charged would represent the cost of providing the transaction and how banks chose to allocate that, she said.

Her colleague, David Tripe, said the fees charged by banks were 'probably a bit steep' but the transfers were more time-consuming than other transactions.

'There are competitors of questionable reputation charging less than that. I suspect the volume of international money transfers [through banks] is getting less because people are finding other ways.'

TransferWise co-founder Taavet Hinrikus said New Zealanders were turning to non-bank providers for international payments in greater numbers.

He said almost half of New Zealanders used a financial services provider that was not one of the five major banks. About 13 per cent use a tech company for at least one financial service, ahead of British customers at 7 per cent.

Of those using fintech providers, 45 per cent used a tech company for general banking and 36 per cent for international money transfer. 'This correlates with the fact that New Zealand has the second-highest population of nationals living overseas in the world, making it a key corridor for overseas money transfers and remittances,' Hinrikus said.

'After decades of average bank service and high fees, it's clear that people in New Zealand have had enough and are ready to try something new. With so many Kiwis travelling or living overseas, it makes sense that people are now using fintech options to access and manage money faster and cheaper - especially for historically expensive services like international money transfer.'

Sending $1000 through international transfer, via internet banking where applicable.

Westpac: US$659.05

ASB: US$666

ANZ: US$664

BNZ: US$661.54

Western Union: US$668

TransferWise: US$687.89

CurrencyOnline: US$683

Travelex: US$665