LONDON (Reuters) - U.S. and UK banks charge on average more than 7 percent for international money transfers worth $1000, several times the average cost at a new group of web providers, the first detailed study of the market showed on Thursday.
The report by FXCompared.com begins a regular monthly index measuring the effective cost of shifting money through both banks and the money transfer companies that have begun to put pressure on a business previously regarded as a big cash cow for lenders.
The index measures the cost - including fees and the spread to the central market rate at which banks trade currencies with each other - for a range of transaction values and currencies. Those are gathered by shopping expeditions at dozens of Canadian, U.S., Australian and UK banks and brokers.
The new generation of web-based transfer firms have poured cash into advertising highlighting the profit banks take when moving money between accounts in different jurisdictions or currencies.
The results of the study show banks charge three or four times more than such providers for transactions worth the equivalent of 1,000 pounds sterling. The charge drops to less than three times for transactions over 10,000 pounds.
Costs in Canada are noticeably lower than in the United States, where capital and regulatory barriers have made it harder for broker-style operations like Transferwise or World First to break through.
In the summer holiday months, costs at UK banks were also a quarter less than the U.S. equivalents.
“With all of these fintech-style operations out there, there has been pressure coming to bear on the banks,” said FXCompared Chief Executive Daniel Webber. “The UK is the place where the banks have taken the biggest bashing on this issue.
“But we would also stress that the difference does come down the further out the curve one goes on transaction values.”
More details on the study are available from: www.fxcompared.com
(This version of the story was refiled to fix the link)
Writing by Patrick Graham, editing by Larry King