91����ԭ��

Wise has launched a petition to call for EU lawmakers to close the loopholes that would enable hidden fees via the Payment Services Regulation (PSR). 

According to a new campaign by fintech company Wise, consumers and small and medium-sized businesses in the EU lost €30bn in 2023 to hidden fees in international payments. 

“Wise is now calling for the Council of the EU to do what’s right for people and businesses and follow the strong transparency line drawn by the European Commission and the European Parliament. No more watered-down regulations and no more loopholes,” said Magali Van Bulck, head of EMEA policy at Wise. 

Van Bulck continued that the Council of the EU under the Belgian presidency is now in the position to end this issue by closing loopholes in existing regulation and adopting a strong transparency stance in the PSR.

As part of its campaign, Wise has commissioned research from Capital Economics, which reveals that two-thirds (66 percent) of international payments fees paid by consumers and businesses are exchange rate margins. 

Van Bulck pointed out that these fees are usually difficult to find or not communicated at all by financial providers to their customers. 

Capital Economics findings suggest that €9bn is lost to those hidden fees by consumers and businesses in the eurozone and the remaining €21bn by those in non-euro EU countries. 

“A lack of fee transparency means that this remains a massive problem that consumers are completely unaware of,” said Bulck. “Providers bank on the fact that consumers won't do the complicated maths, and this creates a problem to the tune of billions for consumers and SMEs."

Findings from Capital Economics suggest that EU consumers unknowingly lost €5.6bn last year; roughly €3.2bn when travelling abroad and €2.4bn when sending money abroad to support families and friends. 

Meanwhile, roughly half of European small and medium-sized businesses export goods outside the eurozone, which makes them particularly vulnerable to hidden fees in inflated exchange rates. 

Further, via an opt-out from EU legislation, banks and financial providers are also legally allowed to bypass existing transparency regulations when servicing these types of businesses.

And in the last year alone, Wise’s research suggests that exporters in the EU lost €25bn to fees hidden in inflated exchange rates: €5.4bn in the eurozone and €19.6bn in non-euro countries. 

Cross-border payments regulation being circumvented

The law that payment service providers (PSPs) are accused of circumventing is the Cross Border Payment Regulation 2 (CBPR2). 

This states that financial providers should show all fees, including “currency conversion charges” when consumer and business customers pay in EU currencies. 

However, according to Wise, financial providers continue to hide fees in marked-up exchange rates. 

This means that a provider can, for example, advertise holiday money and international payments as free or as costing a small upfront fee, but then subsequently hide a big part of the cost in an inflated exchange rate. 

For example, a provider can say transferring €1,000 to Sweden costs €5, but they fail to disclose that there is a 3 percent mark-up over the mid-market exchange rate, which means the cost is closer to €35 than to €5. 

Wise has said that “true price transparency is the only way consumers and businesses are able to actually compare the market and shop around”, and that through the PSR all PSPs should be required to disclose their exchange rate mark-ups against a benchmark rate — ideally, the mid-market exchange rate. 

“The PSR could put a stop to hidden fees, enabling consumers and businesses to finally know exactly how much they pay.

In the PSR proposal released last year, the European Commission said that PSPs overseeing credit transfers and/or money remittance transactions involving a currency conversion will need to disclose estimated charges for currency conversion to their customers. 

This will need to be via a percentage mark-up over the latest available applicable foreign exchange reference rate issued by the relevant central bank. 

However, some, including Van Bulck, have warned that this could have negative consequences and could give rise to operational challenges for PSPs. 

The European Parliament's compromise text has moved away from this, but will need to be negotiated alongside the European Commission and the Council. 

"The latest compromise text adopted by ECON showed commitment to move away from central bank rates to an independent, mid-market rate, which is welcome,” said Van Bulck. 

Van Bulck explained that central bank rates are static FX rates that are only updated once every 24 hours on business days.

“This prevents providers from being able to price in a way that reflects the real-time FX market, as firms that use live rates would have to resort to showing their prices in a daily way rather than in real-time,” she told 91����ԭ��. 

However, Van Bulck said that even if the PSR has the the central bank rate as a benchmark, although not perfect solution, would be a step forward in regard to transparency. 

“There are some banks, like ING, that have become very transparent for some of their cross-border payments,” she said. “Yet, until there is a black-and-white rule forcing them to disclose the full amount including FX markup, there is no incentive for them to do this.”