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SMEs in Leeds Pay 6% Over the £414,068 Average for Overseas Payment Fees: FCA Must Help Says Wise

Expansion is never easy for any startup, but its made all the more difficult when the small to medium enterprise (SME) is faced with large international payment fees. Research from Wise, the money-moving paytech, has revealed that SMEs in the North of England especially struggle with this as they spend ~£414,068 on international payment fees. Notably, firms in Leeds pay six per cent above this.

Of the 1000 SMEs surveyed by Wise, 30 per cent said the high exchange rate was the primary reason for remaining national. Meanwhile, 25 per cent looked towards the exchange rate volatility, and a further 25 per cent at the inconvenience of traditional banking services, as reasons to not go overseas.

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 the North of England. 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.

“With a quarter of SMEs (25 per cent) 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.

The tough economic climate this past year has made success in the financial difficult from the get-go. However, over a quarter of those looking to expand (28 per cent) have noted that exchange rate volatility has been the biggest challenge with overseas banking.

Maddock continued: “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. Using a digital transfer platform such as Wise allows businesses to manage money globally, built to save money and time, so business owners can spend more time focusing on growing their business.”

Change must start at the top 

In order for businesses to find themselves in a more favourable environment for success, the government must do more according to Wise. Regulations must be tighten to make fees clearer and the market more competitive. In doing so, SMEs will have greater awareness and be able to make educated financial decisions.

Existing legislation, such as the Cross Border Payment Regulation 2 (CBPR2), states that banks should make fees clear when business customers trade in Euros. However, this is often being ignored or circumvented by banks. Namely, by fees hidden in marked-up exchange rates.

North America is the target market for over a third of SMEs in the North of England and Scotland. However, this is even more challenging than the EU. The Payments Services Regulation (PSRs), currently under review, is clear in its aim to achieve greater transparency. However, as a result of vague language and banks having the option of a ‘corporate opt out’ when dealing with business customers, SMBs are the ones to suffer.

Therefore, Wise has asked the FCA the following:

  • Better enforce CBPR rules and provide additional guidance to banks so their intention to ban hidden fees rules is respected
  • Ensure that, as part of it PSR review, all payments overseas are subject to transparency, with banks forced to make fees clear – End the ‘corporate opt out’, which penalises SMBs for no good reason
Case study: RedboxVR
Simon Fretwell, founder at RedboxVR
Simon Fretwell, founder at RedboxVR

Simon Fretwell, founder at RedboxVR, based in the North West, said: “RedoxVR’s journey began in 2016, with a clear focus on providing VR kits for educational purposes. As time went on, we earned the prestigious position of being the UK manufacturing partner for Google Exhibitions software. This propelled us into new markets and ventures.

“From our main office in Blackpool and our established factory in Manchester, our influence now reaches far beyond the North West of England. Operating in Europe, the US, and the Middle East, we’ve established strategic partnerships with resellers to cater to diverse markets and sectors.

“Due to supply chain challenges, we are now further streamlining our operations by embarking on exciting new ventures in different markets. A new office and hub in Gothenburg, Sweden, is in the works, and we’re also exploring the possibility of establishing a presence in Southern Europe.

“Our partnership with Wise has revolutionised the way we manage our finances. With reduced costs and expedited processes, Wise has alleviated the challenges we once faced with banks, where delays often hindered our operations. Wise has undoubtedly played an important role in our success story.”

Author

  • Francis is a journalist and our lead LatAm correspondent, with a BA in Classical Civilization, he has a specialist interest in North and South America.

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