Fabio Panetta, European Central Bank executive board member and incoming governor of the Bank of Italy, is right to point out that cross-border payments are “prohibitively expensive and sluggish” (Markets Insight, November 1). But his thesis, that a lack of governmental co-operation and adequate technology are the root cause of this problem, is wide of the mark. The real reason is a chronic lack of competition. For years, retail banks have wilfully, and without supervision, misled customers about the cost of foreign exchange (FX) to the tune of billions of pounds. Hidden fees affect everyone from small businesses purchasing from overseas suppliers, to British holidaymakers, to those remitting money to their families out of or into the UK.
That is why we and more than a dozen of our peers in the UK financial services industry appealed directly to the chancellor in July to make the UK the first country to enforce transparency on foreign exchange transactions, something that would in turn open up competition.
The government should mandate that the total cost of currency conversions, including any mark-up or margin, is transparent; create a clear definition for terms such as “conversion charge” and make FX providers use the same aggregated mid-market rate. The Financial Conduct Authority, as regulator, has an important role to play in issuing clear guidance to all companies serving people with foreign currency.
Unlike other areas of financial regulation, this is a straightforward problem to resolve. Technology is not a barrier.
Kristo Käärmann
Founder and Chief Executive, Wise
London E1, UK
