Small businesses losing $1000s on bank transfer fees

Small businesses across Australia are unknowingly paying a hidden cost in 2024, with many sticking to familiar banks for international money transfers despite cheaper alternatives. A recent survey reveals that this complacency could be costing businesses thousands annually, even as profit margins tighten in a challenging economic climate.

Small biz sticking with big banks despite higher fees

New research commissioned by Money Transfer Australia has found that 62 per cent of Australian businesses continue to use the big four banks for international trade. Despite these banks often charging higher exchange rate mark-ups and fees compared to specialist providers, many business owners are reluctant to switch. The survey, which polled small business owners and decision makers, highlights that businesses are paying up to $850 more per $20,000 transferred through a bank compared to as little as $100 using non-bank providers.

Larger businesses (with over 200 employees) were more likely to use the big four, with 74 per cent sticking to bank transfers. By contrast, only 45 per cent of micro businesses opted for the same route, indicating that smaller companies may be more cost-conscious when handling international payments.

Familiarity costing businesses thousands

A key reason for the reliance on banks is familiarity. According to the survey, 31 per cent of businesses reported they always use the same bank or provider for their transfers, regardless of the costs. Interestingly, 88 per cent of respondents claimed they are aware of the fees they pay, and 89 per cent know the currency exchange mark-ups charged. Yet, only a small percentage (7 per cent) choose to use a specialist money transfer provider, with most citing trust and local presence as the deciding factors.

Trust plays a significant role in this decision-making process, with 51 per cent of businesses stating they prefer banks for their local support, while 31 per cent admitted they felt more secure having a physical bank branch in Australia.

Why aren’t more businesses switching?

The hesitation to switch to cheaper providers seems to stem from both comfort and concerns about service reliability. While a small number of respondents (15 per cent) benefit from preferential rates, many simply prefer the convenience of handling all their banking needs in one place. Meanwhile, larger businesses are more resistant to change, with 42% sticking with the same provider, compared to 25% of micro businesses.

Money Transfer Australia’s founder, Alon Rajic, explains that this complacency could be costing businesses dearly: “Being complacent about bank fees or fearful of change can cost a business. Specialist providers don’t charge extra fees and offer exchange rates well below the going mid-market rate. It pays to shop around.”

Cutting costs in a challenging economy

In today’s volatile economic landscape, it’s crucial for businesses to find ways to cut unnecessary costs. With foreign trade contributing to almost half of Australia’s GDP, businesses conducting international transactions should take the time to compare providers. Established non-bank money transfer services like TORFX and OFX, which have been in operation for decades and are ASIC authorised, offer competitive rates that can result in significant savings.

For business owners looking to safeguard their bottom line, switching from the big banks to specialist money transfer providers could be a smart move. As Rajic explains, “It makes good sense for businesses to identify where they could further cut costs.”

Check out the full  survey results,

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