Is transparency finally on its way for currency? Probably not.

FX customers have had a rough deal up to now.  Whether they’re taking foreign currency out of an overseas ATM or paying with a card in a restaurant when on holiday, they’ve pretty much been doing it blind and with both arms and legs tied behind their back.  They have absolutely no idea how much they’re being charged in exchange rate mark-up and other fees and whether they will have to sell a body organ to pay the nasty bill when it finally arrives from the bank a few weeks later.

The situation is even worse when transferring money abroad, perhaps to buy an overseas property.  Most online FX companies don’t give any pricing information on their websites at all, even though this is the only bit of information their customers really want.  Instead they trumpet their own credentials (“£34 bn transferred up to now”, “winner of the best office furniture award 2017” etc.), or rely on empty claims of “beating the banks” or “best rate guarantees” to lure potential customers to their website. 

Once there, the only way you can get any pricing information is to fill in a form and then prepare to be bombarded with sales calls.  None of this is particularly pleasant and none of it really helps.  Buyers don’t care whether their provider moves money to 230 countries or what the CEO’s hobbies are.  They just want to know a) how much their new house in the Algarve will cost in pounds and b) which firm will make the process as painless as possible. 

But this price information is exactly the nugget that FX firms don’t want you to know; at least not until their sales team has got your contact details.  FX is big business and in the hands of a skilled sales negotiator you are potentially very hot property yourself.  

Eris FX has always thought this was a fairly shoddy way to treat customers and has refused to join in the practices.  Instead, it shows live exchange rates and pricing openly on its website.  Customers can easily see exactly how much a deal is going to cost without any need for phone calls. 

Eris has long called for the rest of the industry to do the same, unfortunately with little success.  Until now, that is.  Last Sunday there was a ray of hope when the EU introduced the (rather unimaginatively titled) Cross Border Payments Regulation 2 (CBPR2).  It doesn’t exactly trip off the tongue and, frankly, it’s rather a dry read (unless you happen to be locked in your house for a month or so in which case you may decide to tackle it.) 

In a nutshell it says this: Tell customers what their FX deal will cost.  If they’re taking money out of an ATM, tell them how many pounds it’s going to cost them before they agree to it.  If they’re using their credit card, also tell them how many pounds it’s going to cost them before they agree to it.  Also tell them what exchange rate you’re using based on the latest mid-market price.  And start doing it on 19 April 2020. 

Have they started doing this?  We don’t know because no-one’s travelling at the moment, but we’d be very interested to hear from anyone who has spotted this change and what they think of it.

For bank to bank currency transfers the new rules are a bit more vague.  They still say you must tell the customer how much money in total they will send and receive, but providers don’t need to explain how they’ve calculated that price.  So, no mid-market rate for reference.  Exchange rates move all the time, so this means that potential customers have no way of knowing which firm is giving them the best deal unless they can get 25 companies on the phone at exactly the same time. 

The other tricky part is that this pricing information (such as it is) must be given ‘prior to the initiation of the payment transaction’.  What on earth does that mean?  When does the ‘initiation of the payment transaction’ happen?  Is it after you’ve filled in an extensive registration form, sent ID documents in triplicate, spoken to a “personal account manager”, signed on the dotted line for your new French farmhouse, said a tearful farewell to your nearest and dearest and now need to get 250 thousand Euros to the Notaire by Wednesday, rung the FX broker and they’re just about to press the button?  Would you like to wait until then before they tell you the price?  Is that what it means?  Or would you prefer that they just put it on the website to start with.

Well, it appears that, given an opt out loophole in the form of vague European wording, the online FX providers have voted a decisive “Non” to the latter.  In a recent survey, 94.5% of FX customers said they were unhappy with the levels of price transparency and that it was not adequate to be able to shop around and make an informed decision.  94.5% is quite high as a level of dissatisfied customers and you’d think it would trouble the industry participants.   

Maybe it does, but until the EU is able to express itself more clearly in English, it appears that the rewards for the online FX companies of keeping customers in the dark are just too tempting.  We suspect there’s not going to be any meaningful online price transparency from our competitors any time soon.