As in the rest of the world, consumers in Singapore are being fleeced when it comes to foreign exchange costs, a study by TransferWise has revealed. Individuals in Singapore are being charged 15 times more on international payments than companies are, with S$2 billion lost in hidden FX fees annually.
The great foreign exchange rip-off has been highlighted once again this week with the release of a study commissioned by TransferWise—an industry-disrupting payments specialist that can process money transfers 8 times cheaper than a bank.
The study focused on the Singapore market and made use of data from a number of sources, including Refinitiv (formerly Thomson Reuters), the IMF, Statistics Singapore and the World Bank; it suggests that companies are being charged 15 times less per dollar remitted than the average individual in Singapore.
To make matters worse, the study revealed that 70 percent of all FX fees paid in Singapore are unknown to the consumer at the time they transact: of the S$2.8 billion paid for currency conversion annually in Singapore, TransferWise estimates that S$2 billion is hidden within the exchange rate. Given a population of 5.6 million, that translates to a charge of S$357 for every Singaporean!
“Padding” the exchange rate is a practice that has been universally adopted by banks since the industry’s inception and is the reason why cross-border payments have been so lucrative for the sector for so long.
In Singapore, on a S$10,000 international transfer to the UK, it wouldn’t be uncommon to be asked by one of the country’s big banks to pay a S$50 fee, but to then be offered a GBP/SGD exchange rate 1 percent above the interbank rate (the rate at which banks exchange currencies with one another), resulting in a further S$100 hidden charge. Fortunately, owing to the digital revolution, companies like TransferWise can now charge as little as S$45 for the same transaction, for a saving of 70 percent. TransferWise uses the interbank exchange rate for all transfers plus a separate fee that is stated upfront.
“Telling customers how much they are being charged for a service, in dollars and cents, is the right way to do any business. If service providers don’t do this, the regulator can step in,” says TransferWise CEO Kristo Käärmann.
The study shows that Singapore’s consumers still pay well over the odds for money transfers, with to and from remittance costs worth, on average, an estimated 5.65-6.68 percent of the transacted amount. For companies purchasing overseas and repatriating earnings to Singapore, FX costs are more likely between 0.16 and 2.11 percent.
With consumer costs at such high levels, it seems that marketing teams at fintech payments specialists need to raise their game, since traditional (expensive) channels of remittance remain unjustifiably popular.
Enthusiasts would have us believe that Facebook’s own digital currency, Libra, will instantly revolutionize the remittance industry upon its release in 2020 — except it won’t. A harsher reality awaits, with conversion costs, capital gains taxes and a lack of Libra-priced goods all likely to limit its appeal.
Last update: 6 Jul, 2019
No longer will Malaysians sending money overseas be subjected to grossly inflated exchange rates and unnecessary bank charges following news that TransferWise has been granted a remittance licence by Bank Negara.
Last update: 19 Jun, 2019
New research from the European Central Bank shows that banks charge smaller customers up to 25 times more for FX forward transactions and that those who fail to compare providers pay 14 times more for FX than those that do.
Last update: 17 Jun, 2019