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Businesses are being hit with $5.74 billion each year in excess foreign exchange fees, based on recent modelling by Airwallex.
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Excess foreign exchange fees ‘hurting Aussie businesses’
05 May 2023
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11 minute read
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Fintech company Airwallex is calling for greater transparency with fees for international transactions with retailers being charged an average of $45,279 in excess fees each year.
The figure was even higher for online retailers who were paying $49,180 in excess fees on average and $5,786 across all types of businesses.
Airwallex found average foreign exchange rates charged by major providers such as the big banks for major currencies were much higher than other providers in the market.
On average, businesses were paying 3.97 per cent more for their foreign exchange fees with a bank, compared with other lower cost providers.
Multiplying that figure across ABS data on businesses that employ staff, this delivers a nationwide cost of $5.74 billion.
The input and output costs analysed by Airwallex for retailers included fees in their wholesale goods purchasing and sales, logistics and transportation operations, financial services, digital, advertising and marketing expenditure.
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Given the variation in fees charged by different providers, Airwallex account management lead Nathan McNally said businesses should be shopping around for the best fees in relation to who they use for international transactions.
Airwallex said the government should be mandating more transparency in foreign exchange fees, which would also have a deflationary effect on costs for businesses.
“What can look like just a couple of cents of difference on the exchange rate adds up to big bucks out of your pocket,” said Mr McNally.
“The excess exchange fees that businesses are paying is highest for retailers and ultimately gets passed on to everyday Australians at a cost of $298 per person each year.”
Retailers are typically the most impacted industry by foreign exchange fees due to the nature of their operations.
“They need to buy materials and products from overseas, manage the freight and logistics of moving products around, and paying for marketing and advertising before they can even make a sale,” continued Mr McNally.
“At every stage of that process, someone is clipping the ticket with excess foreign exchange costs.”
Mr McNally said businesses tend to stick with same financial provider and package they were offered when they started, despite the growth in their business.
“The financing the bank offered your business is obviously critical, but the transaction package that came with it bundles up and hides high exchange rates which are just fattening the banks’ bottom lines and hurting yours.”
“In this inflationary environment, we know businesses have to fight to keep their products affordable despite rising costs and one of the quickest ways to do that is to shop around on your international transaction partner.”
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