Australian regulator to probe forex services

Australia’s competition watchdog has launched a probe into foreign currency conversion services, in the latest regulatory inquiry to hit the country’s embattled finance sector already engulfed in a major public investigation.

The Australian Competition & Consumer Commission said it will examine the pricing of foreign exchange services and decide whether there are barriers to “effective price competition” based on a World Bank finding that the cost of sending money from Australia was 11 per cent higher than the average among G20 countries.

“Complaints have been made about a number of suppliers, including the big four banks, a number of online transfer companies, Travelex, Western Union, and PayPal,” the regulator said in its initial issues paper, released on Tuesday.

The announcement of the new inquiry comes just days after a report into the finance industry found Australia’s banks and financial services companies were motivated by greed and regulators failed in their duty to properly punish misconduct.

Australians, who sent A$8.8bn ($6.36bn) overseas in 2016, faced a cost of 7.9 per cent of the money sent, ahead of the global average of around 7 per cent, according to World Bank data.

While a number of new low-cost providers had entered the market in recent years, “anecdotally”, the ACCC said, their entry has not “significantly impacted the prices charged by some existing suppliers, such as the big four banks”.

It added:

For example, as at 31 August 2018 the big four banks were charging exchange rate mark-ups on foreign currency transfers of around 4 to 5 per cent. They also charged their customers transaction fees for initiating each transfer, ranging from AU$0 to AU$32 per transaction.

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