A new study has found that UK banks charge small and medium sized enterprises (SMEs) nearly £4bn in hidden transfer fees each year to make international payments.
96% of these fees are hidden from the customer using the exchange rate offered. This is the first time that a study into the actual rates charged by banks has been conducted.
International trade is worth over £700bn to UK SMEs according to McKinsey&Co and recent figures from Oxford Economics show that the number of SMEs doing business in more than six countries will increase 129% in the next three years. 50% of all UK SME international trade is with Europe.
The study, “UK SMEs International Payments Analysis” was conducted by payments consultancy Accourt and commissioned by Money Mover, the online currency exchange and international payments service. It highlights the lack of transparency by banks around the fees they charge SMEs and how these fees are calculated.
The study found that 96% of the revenue for a bank for an average transaction of £75,000 within the EU comes from the margin that banks add to the exchange rate they receive from the money markets – known as the ‘spread’. The charge is hidden in the exchange rate, therefore the SME will never see it - even though it makes up the majority of the amount that the bank charges the SME. The average total transaction cost charged by a bank to a SME customer on a transfer of £75,000 is 2.43%, or £1,822. Of this cost, £1,807 is based on the spread which is hidden from the customer.
Overall, SMEs will pay between 1.12% and 3.68% of the transfer amount due to spread. This hidden charge is in addition to the upfront fee that banks disclose when making a transfer. Including fixed fees, the most expensive bank makes 3.70% on any transfer and the cheapest makes 1.14% for transfers over £100k. The table below displays the ranking of banks surveyed for the average SME transfer amount of £75,000:
| GBP to EUR |
GBP amount |
EUR amount |
Bank Rate |
Mid-Market rate |
FX Spread Cost |
Fixed Fees |
Total spread (including fixed fees) |
Total cost of transaction |
| Barclays |
£75,000 |
€ 98,917.50 |
1.3189 |
1.3675 |
3.68% |
£15 |
3.71% |
£2,775.82 |
| Lloyds |
£75,000 |
€ 99,097.50 |
1.3213 |
1.3571 |
2.71% |
£15 |
2.73% |
£2,047.09 |
| NatWest |
£75,000 |
€ 101,864.62 |
1.3582 |
1.3906 |
2.38% |
£12 |
2.40% |
£1,799.76 |
| HSBC |
£75,000 |
€ 98,845.88 |
1.3179 |
1.3482 |
2.29% |
£4 |
2.30% |
£1,723.44 |
| RBS |
£75,000 |
€ 100,664.78 |
1.3422 |
1.3670 |
1.85% |
£12 |
1.86% |
£1,395.75 |
| Santander |
£75,000 |
€ 101,288.51 |
1.3505 |
1.3714 |
1.55% |
£25 |
1.58% |
£1,187.15 |
Commenting on the findings of the study, Money Mover CEO Hamish Anderson said, “When it comes to international payments, it’s clear that the UK’s major banks are overcharging and underserving their SME customers. The UK’s banks are collectively failing to give SMEs the knowledge, transparency and visibility which they need to make an intelligent and informed decision. This lack of transparency is not only unfair and uncompetitive, it’s also costing the UK’s SMEs precious cash in unnecessary fees.”
Cost was not the only issue revealed by the study - transparency also emerged as a key concern surrounding currency transfer services. In some cases, the SME won’t know how much they are being charged or the amount that the recipient will receive until after the payment has been made. This makes it very difficult for SMEs to compare banks and the costs they apply, and therefore choose the lowest cost provider.
In addition, the utility of services offered by banks provide very little in the way of appropriate and useful feature for their customers. SME customers could benefit hugely from offerings that integrate into SMEs exiting financial and accounting systems and processes.
“The UK’s SMEs are the growth engine of the UK economy,” continued Money Mover CEO Hamish Anderson. “In an increasingly globalised economy, business should review how they move money across borders. There are much better ways than banks.”