US banks tighten cost of FX transfers sharply before Christmas
LONDON: US, Canadian and Australian banks cut the cost of international money transfers in December before the traditional boom in migrant workers sending cash home for the holiday season, a regular index of market costs showed on Friday.
The International Money Transfer Index (IMTI) run by money transfer comparison and intelligence firm FXCompared showed for the first time that US banks were cheaper than British counterparts, owing to a steady easing in costs in recent months. Foreign currency transfers has long been an easy cash-cow for banks, with major global lenders charging up to 8 or 9 percent of the value of smaller-scale transactions to send money abroad and exchange it into the appropriate local currency.
A raft of small web-based providers, like Transferwise, World First or Azimo, have begun to eat into that business but have struggled to gain ground in a US market where capital and regulatory barriers to entry are high. FXCompared Managing Director Daniel Webber said that it appeared to be banks competing with each other that had driven the cost in the US market down, citing falls in costs at major lenders including Wells Fargo, Bank of America and JP Morgan Chase. “On average all the biggest US banks have become cheaper in recent months, while some of the smaller banks have moved downward with their pricing quite aggressively,” he said. “In a sector still dominated by banks and Western Union, the US banks have become much more competitive than their UK counterparts over the past year.” A breakdown of the numbers showed Australian banks remain by far the most expensive, charging 7 percent to transfer the equivalent of 1,000 British pounds, down from 7.2 percent a month earlier. In the United States, those costs are 5.6 percent on average compared with 6.0 percent a month earlier and the average of 6.1 percent charged by UK banks. The non-bank online providers in all three jurisdictions are much cheaper in comparison, charging between 1.6 and 1.8 percent of the value of the transaction, the study again showed.