British banks have cut the amount they charge for small international transfers between currencies by more than a fifth in the past three months as competition in the sector continues to grow, an index of market costs showed on Wednesday.
Money transfer comparison and intelligence firm FXCompared.com said its quarterly International Money Transfer Index (IMTI) showed banks were starting to respond more aggressively to the arrival of small online providers.
Banks cut the average cost of a transfer of 1,000 pounds ($1,410) by just under 22 percent between December and March, the firm said.
Charges fell to 4.8 percent of the value of each transaction compared to 6.1 percent in December, still three times more than the 1.6 percent charged by non-bank providers.
Foreign currency transfers has long been an easy cash-cow for banks, with major global lenders charging upto 8 or 9 percent of the value of smaller-scale transactions to send money abroad and exchange it into the appropriate local currency.
Small web-based providers such as Transferwise, World First and Azimo have begun to eat into that business.
“It is likely the reason we have seen such a sharp drop in the amounts banks are charging is down to competition from currency brokers,” said FXCompared managing director Daniel Webber said.
“But there is still a very big difference between what you pay to a bank for moving money overseas compared to what you would pay a broker.”
The index measures the cost – including fees and the spread to the central market rate at whichbanks trade currencies with each other – for a range of transaction values and currencies. Those are gathered from dozens of Canadian, US, Australian and UK banks and brokers.
Australian banks remain by far the most expensive, charging 6.8 percent to transfer the equivalent of 1,000 British pounds, down from 7.0 percent in December.
However, in the US, those costs rose to 6.1 percent from 5.6 percent during the December month.