Businesses lost over $1.18b due to hidden exchange rate markups
There were hidden exchange rate markups when sending cash overseas.
Businesses in Hong Kong lost an estimated $1.18b in 2021 from hidden exchange rate markups when conducting money transfers abroad, according to an independent study by business research agency, Coleman Parkes.
The research, conducted by Coleman Parkes, for global technology firm Wise, found the inefficiencies and lack of transparency around the traditional banking system used to move money globally.
Its findings showed that Hong Kong businesses paid $1.82b in fees on cross-border money transfers, with $638m spent for transaction fees but 65% or about $1.18b were hidden as exchange rate markups on currency conversions when sending money globally.
The hardest hit by the non-transparent currency exchange practice were the small and mid-size enterprises, which lost about $1.17b.
Over 73% of businesses polled in the study said understanding the cost of sending money overseas is easy but only 18% correctly identified the true cost of sending cash, which is both upfront transaction fee and markup in the exchange rate. Also, about one in four or 28% of businesses even said it was free.
Wise said it displayed a lack of transparency in cross-border payments as many are unaware that providers tend to provide an undisclosed markup to the exchange rate.
The study conducted a poll involving 200 senior decision-makers from January to February 2022, Wise said. Those who participated are accountable for overseas payments and foreign exchange transfers in small and medium-sized firms and multinational companies.