Forex fees bite consumers

January-17-05


Foreign exchange fees cost millions - Herald Sun


SMALL businesses and consumers are losing millions of dollars in foreign exchange transactions each year, according to online foreign exchange service OzForex.

A recent survey of exchange rate quotes from six major providers to buy 50,000 (about $A85,000) to send by telegraphic transfer found the best charged a margin of about 1.35 per cent on the underlying Interbank rate.

The worst provider charged more than 1.95 per cent.

In dollar terms this adds $A1173 and $A1682, respectively, to the cost of the transfer.

OzForex says it offers margins of less than 0.8 per cent against the interbank rate, and often less for corporate clients -- a saving of between $A500 and $A1000.

OzForex's Matthew Gilmour says margins charged on foreign exchange transactions are virtually unchanged from a similar survey in November 2001.

"Thousands of small and medium-sized businesses around Australia are doing exactly these sorts of transactions through their banks every week, often resulting in thousands of dollars extra cost each year," Gilmour says.

"For the privilege they get to stand in queues and deal with staff who often know little about foreign exchange."

Gilmour says that unlike the share market, where all investors have access to the same price to buy or sell shares, foreign exchange is not a level playing field.

"Generally only the banks know exactly where the real market is, and price transparency depends very much on where you are in the food chain," he says.

"Larger corporate and institutional customers can see and deal at professional market rates -- but smaller customers have little idea where the real market is.

"While it is fair that smaller volume deals attract a different price, most customers would be shocked at the size of these margins and the dollars involved."

Sydney-based OzForex claims to be the Aussie Home Loans of foreign exchange and says that since its launch in 1998, it has become one of the world's leading online foreign exchange services.

It reports more than 300,000 visitors to its website a month and operates in the Australian, British and NZ markets.

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