Story sponsored by The Currency Shop.
The Reserve Bank of Australia (RBA) has called out Australian banks for their hefty currency transfer rates.
In a speech during the 2019 Australian Payments Network Summit, governor Dr Philip Lowe spoke about cross-border retail payments and how the costs are still too high, which poses a problem not just for the Australian economy but for other countries as well.
A World Bank analysis in Lowe's report revealed that the price of money transfer from Australia is significantly higher than that of the average cost across the G20 countries, such as Canada, France, Germany, Japan, South Africa, United Kingdom, and the United States.
Moreover, most customers are also not made fully aware of exchange rates and the final amount the recipient gets after conversion as well as add-on fees.
The RBA made their comparison of the marketplace and found that major banks add an average of 5.5 percent mark-up. This is way higher than the add-on fee by digital money transfer operators (MTOs), which is only one percent.
Additionally, according to Lowe, the hefty transfer rates are a problem for South Pacific countries because a significant portion of people from these nations depends on remittances from family and friends in the Australasia region.
Low-income workers are subjected to pay considerable fees, which lessen the amount that their intended recipient obtains on their end. This money could have been used for other more pressing needs.
Some online resources provide more detailed information on the exchange rates, transfer time, and other fees involved in the process. Tables like this compare international money transfers to help customers get the most value for their money.
Money transfer solutions
Not only does the cross-border process entail high costs but it also takes several days before the funds arrive at its destination country. This inefficiency is typically caused by traditional banking methods.
International tech firms are looking at ways to improve the current Australian money transfer system through new technologies.
This serves as a wake-up call for traditional financial institutions to improve their service and fees, while ensuring that they uphold the requirements of the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Act.
Lowe acknowledged a rise in the global focus to reduce cross-border payments cost. For the RBA's part, they aim to facilitate a standardised and more effective payment messaging through the implementation of the ISO20022 standard, which is an electronic data interchange requirement for financial institutions.
The RBA has also partnered with the Reserve Bank of New Zealand, Australian Transaction Reports and Analysis Centre (AUSTRAC), and other central banks in South Pacific countries to address the issues of high transfer costs and limited competition.
Australia's new payments platform
The money transfer process may become better once Australia's new payments platform (NPP) has been established. The system was developed to improve the banking experience for Australians.
The idea for the NPP was first announced in 2013. However, it wasn't until February 2018 that the infrastructure became accessible to the public.
One of the platform's significant benefits is real-time money transfers between banks and providers within the country. A primary feature of the NPP is the PayID, which is an account addressing system that makes sharing account details more effortless.
Bank users no longer need to memorise their BSB or bank state branch and bank account number. Instead, they can use their phone number or email address to confirm transactions and transfer money instantly.
Businesses can also use their Australian registrations, such as business number, company number, registered body number, or registered scheme number. For those with accounts from different financial institutions, they need to set up one PayID for each.
Osko, an overlay service, works with bank's apps or websites to facilitate real-time transfers and PayID. This makes the process more convenient and accessible to Australians.
The RBA has spoken up about the hefty money transfer rates imposed by major banks in Australia. The issue doesn't only affect Australian residents but also other countries.
This is because people in the Australasia region send money to their family and friends in their hometown, especially in the South Pacific area.
The New Payments Platform (NPP) is one solution to this issue. With Osko, users can take advantage of real-time transfers and PayID, which is an account addressing system.
Story sponsored by The Currency Shop.