Wise, the global technology company building the best way to move money around the world, has today released new research which has revealed that Leeds-based SMEs spend an estimated third (34%) of their overheads on international payment fees when using traditional banks.
Across Yorkshire, it is estimated that the average business spends almost £428,000 on international payment fees, this came just shy of the North East, where they spend an extra 8%.
The survey, conducted with 1,500 SMEs across the North of England and Scotland*, showcased the struggles for smaller to medium sized enterprises when it comes to business expansions, given the hands they are dealt around international payment fees as a result of sending and receiving payments via traditional banks.
It is therefore unsurprising to learn that 29% of Leeds-based SMEs are put off from operating internationally, due to the high costs of international banking services.
Given fraught international conditions when it comes to overseas banking, over a quarter of SMEs in Leeds (26%) claimed that exchange rate volatility had been one of their biggest challenges and a barrier to success over the last year.
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 Leeds. 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 fifth of SMEs (20%) 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.
“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.”
Wise is calling on the Government to tighten existing regulations to make fees clearer and the market more competitive so that SMBs have the knowledge they need 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 via fees hidden in marked up exchange rates.
The situation is even worse for businesses trading overseas outside of the EU, which is particularly alarming given that a third of SMEs in the North of England and Scotland with expansion plans overseas are targeting North America as the priority market. The Payments Services Regulation (PSRs), currently under review, are clear in their aim to achieve greater transparency, but due to vague language and banks having the option of a ‘corporate opt out’ when dealing with business customers, SMBs are the ones to suffer.
Wise is therefore asking the Financial Conduct Authority (FCA) to:
Ruby Gains, Co-founder at Bhavana Experiences, based in Leeds, said: “Wise has enabled me to turn my passion for travel and my love for India into a business. Thanks to Wise’s affordable rates for transferring money between the UK and India, I am able to easily manage activities, hotels, transport and all the other reservations that come with running a tour company. This means I can focus on what matters: delivering a personalised, unique experience for my customers.”
Phillip Davies, MP for Shipley, West Yorkshire, commented: “To foster true global connectivity for Yorkshire’s businesses, we must tackle the elephant in the room: the exorbitant banking fees suffocating SMEs’ aspirations to go international. It’s great that Wise is bringing attention to this issue, empowering our entrepreneurs to break barriers and access new markets without being burdened by the weight of unnecessary financial obstacles.”
Today, Wise has more than 400,000 active business customers – and 16 million customers in total. For more information on Wise, or to set up an account, visit: https://wise.com/.
