Average Scottish firm 'spending £420k a year on global payment fees' - prompting call to tackle issue

The average business in Scotland is spending nearly £420,000 a year on international payment fees, according to a new report calling for tighter regulation in this area to stop the issue stymieing firms’ growth plans.

The report flags the 'hugely negative impact sending and receiving money internationally via traditional banking methods is having on businesses based in Scotland'. Picture: Matt Cardy/Getty Images.

Fintech firm Wise, which helps firms move money internationally, has found that the average business north of the Border spends £417,585 on such fees annually when using traditional banks – equating to more than a third of their yearly overheads, and the same as the cost of hiring 15 full-time staff.

Wise's research has also showed that more than a quarter of small and medium-sized enterprises (SMEs) in Scotland say exchange rate volatility has been their biggest challenge and barrier to success over the last 12 months. Over the next year, 31.4 per cent say they plan to enter new markets, with just under a quarter planning to expand overseas, and nearly half looking to make in-roads into North America. However, about a third are put off operating internationally due to energy costs and the inconvenience of international banking services.

Wise says existing legislation, such as the Cross Border Payment Regulation (CBPR) 2, states that banks should make fees clear when business customers trade in Euros, “however this is often being ignored or circumvented by banks via fees hidden in marked-up exchange rates”, adding that the problem “is even worse for businesses trading overseas outside the EU”.

The fintech firm, which says it has more than 400,000 active business customers and 16 million customers in total, is now calling on the state to tighten existing regulations to make fees clearer and the market more competitive so that SMEs “have the knowledge they need to make educated financial decisions”.

It is asking the Financial Conduct Authority to introduce steps such as better enforcing CBPR rules and providing more guidance to banks “so their intention to ban hidden fees rules is respected”; and ensuring that, as part of its Payments Services Regulation review, all payments overseas are subject to transparency, with banks forced to make fees clear.

Jack Maddock, senior product manager at Wise, commented: “The data clearly outlines the hugely negative impact that sending and receiving money internationally via traditional banking methods is having on businesses based in Scotland. Whilst banks often profess their support and claim to champion SMEs, it’s clear to see this is a vanity project, and far outside of reality.

Concerning

“With almost a quarter of SMEs surveyed planning to expand overseas within the next 12 months, it’s incredibly concerning to see the extent to which international banking fees are impacting their success and potential for growth. We need to ensure that more is done to support businesses in this situation.

“At Wise, we’re pushing for businesses to be able to transact anywhere seamlessly. That means money without borders: moving it instantly, transparently, conveniently, and eventually for free… so business-owners can spend more time focusing on growing their business.”

SNP MP Dr Lisa Cameron said: “On top of the cost-of-living crisis, I was aghast to discover from this vital research that so many small business owners in my constituent are also facing hidden banking fees and charges. These issues must be made transparent to all business-owners and commitments made by banks to minimise the financial struggles of already stretched SMEs across the UK.”