Every year Australians send billions of dollars overseas to family and friends.
This might be taxi drivers working an extra shift to help out somebody who’s fallen on hard times back home. It could be someone who’s working a bit extra in a pharmacy in order to help put a nephew through school.
Right now the pricing of remittances is bamboozling. It’s too confusing and it means you get an incredible spread of prices. Australians pay more for remittances than do people in the United States or in Korea.
Just to give you some sense of the size of what the fees look like, an Australian who wants to send $1000 overseas will pay according to the World Bank $77 in exchange rate markups and flat fees.
One of the problems in this market is competition isn’t working to drive down prices for consumers. That’s because the pricing comes in two parts. There’s a flat fee for the transfer, but there’s also an exchange rate spread.
We’ve seen too many providers saying that they’re charging a small fee when what they mean is the flat fee is small but the exchange rate spread is big. I’ve seen this behaviour even by some of our biggest banks that have just faced a royal commission.
Remittances present special problems because it’s often hard to figure out the true fee. All too often, banks will tell their customers the flat dollar amount, but won’t fess up to how much they’re making from the exchange rate.
It’s hard to have a competitive market when customers don’t know what prices they’re actually paying.
That’s why Labor is promising to require full fee transparency, where customers are told the total cost of transferring money: both the flat fee and the exchange rate margin.
Like mortgage comparison rates, full fee transparency will make it easier for customers to do an apples-to-apples comparison, and quickly find out who’s offering the best deal.
Our solution, the policy that’s Australia will get if a Shorten Labor Government is elected, is a policy of full fee transparency. If you’re in the market, transferring money overseas, you have to tell your customers the total charges they will pay for remittances.
Our plan has been welcomed by the Federation of Ethnic Community Councils of Australia and welcomed by CHOICE. It’s been welcomed by Transferwise, one of the providers in the market that has shown its customers the full fees they’ll pay.
As part of Labor’s commitments to work with multicultural communities, this policy emerged from a series of roundtables in Sydney, Brisbane and Melbourne.
Our plan to save consumers money on remittance fees was developed in consultation with experts in the sector and with people in multicultural communities who didn’t want so much of their hard-earned wages to be eaten up by the fees and charges of financial intermediaries.