The £2bn rip off – how banks turn foreign transfers into ‘rivers of gold’
With the country’s banks under unprecedented pressure to reform their practices, new research has highlighted how they’re abusing their dominance and exploiting the public’s need to transfer money overseas.
Using a combination of high charges and poor exchange rates, banks earn an estimated £2bn from the 37m foreign transfers that take place every year in the UK.
“For what’s little more than a couple of clicks of a computer button, the fees charged for foreign transfers are little short of criminal.” said TransferWise co-founder by Taavet Hinrikus.
“Up until now, the banks have been able to exploit the fact that everyone needs an account to function. They’ve abused their position – while pocketing the advantages technology offers them – and turned foreign transfers into a £2bn a year river of gold.”
On a £10,000 transfer, total bank charges – including money lost through the use of a poor exchange rate – would total approximately 3.5 per cent. On a £1,000 transfer the charge rises to approximately 5 per cent … while on a £100 transfer the bank would pocket between 15 and 20 percent of the transaction.
Taavet believes the digital revolution will force banks to amend their practices.
“Strategically, technology will break the banks’ stranglehold over the public in a similar way that low cost airlines did in aviation 20 years ago and Skype did to telecoms,” he said. “Up until now there were no cheap, simple and safe options available to the public.”
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