Aussies Lose Millions in Bank Forex Deals

Sunday, 13 February 2005


Cortlan Bennett - Sunday Times (WA)


Australian small businesses and consumers are losing millions of dollars a year in foreign exchange transactions, according to online service provider OzForex.

Managing director Matthew Gilmour said Australian Banks were some of the most uncompetitive in the world when it came to forex transactions.

Many consumers were also unaware of interbank rates and how to gauge the best deals.

"Most customers don't realise there's a wholesale or interbank rate (the rate at which banks lend to each other), so they've got nothing to benchmark the rate they're getting from their bank versus what's actually happening in the underlying market," Mr Gilmour said.

"Even if they did know what the interbank rate was, the banks generally wouldn't negotiate on the rates they give smaller clients."

Mr Gilmour said two surveys by his company in 2001 and November last year found profit margins for Australian banks on forex deals remained virtually unchanged despite continuing economic globalisation.

He said most banks continued to focus on large forex customers to the detriment of small to medium-sized clients.

"To some extent, with very small transactions, it is fair that the rates (offered by major banks) are not interbank wholesale rates," Mr Gilmour said.

"Every provider needs to make a profit - it's just a matter of what's reasonable and fair."

"Particularly those middle-sized transactions, you would expect those amounts to be getting a pretty fair rate versus the interbank rate."

"That's where it's costing people hundreds of dollars, sometimes thousands of dollars, each year."

"Thousands of small and medium sized businesses around Australia are doing exactly these sorts of transactions through their banks every week, resulting in extra costs."

As an example, Mr Gilmour said his company canvassed quotes from six banks to remit 50,000 euros (about $85,000), with margins varying from 1.35 per cent to 1.95 per cent.

"In dollar terms, this adds $1173 and $1682, respectively, to the cost of the transfer," he said.

Mr Gilmour said his company charge a 0.8 per cent margin, which would save $500-$1000.

He said thousands of small and medium firms, expats and migrants were switching to private exchange dealers like his for better rates and service.

Though OzForex deals only in remittances - not foreign currency cash or cheques - it offers direct transfers and charges a flat $15 fee for transactions.

"Some of the banks now let you do foreign-exchange payments on their website like we do," Mr Gilmour said.

"But even when you do use those (internet) services, it does fix the inconvenience, but the rates are still pretty horrendous - there's generally no improvement in the rates."

Launched in 1998, Sydney-based OzForex also operates in Britain and New Zealand.

It has 6000 regular clients and 350,000 hits on its website each month, according to Mr Gilmour.

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