SMEs prefer big four banks for international trade despite higher fees

Rosie Drew

September 26, 2024 7:58

Despite typically higher exchange rate mark-ups and fees compared to specialist money transfer providers, 62% of small-to-medium enterprises (SMEs) opted to conduct international trade through the big four banks this year.

Data from comparison platform, Money Transfer, found that for every $20,000 exchanged through the banks, businesses could be paying up to $850 extra, compared with as low as $100 through a non-bank money transfer provider.

Larger businesses are significantly more inclined to use banks for their financial needs, with 74% opting for traditional banking services, compared to just 45% of small businesses.

However, large businesses are less likely to change providers, with only 42% considering a switch, while 25% of small businesses are open to exploring alternatives.

Surprisingly, it also found that 88% of SMEs know how much they pay in fees when they transact internationally, and 89% know how much they pay in currency exchange mark-ups. Nine in 10 (91%) check the fees and mark-ups payable before they transact.

Australia has robust foreign trade, with the Australian dollar being the sixth most traded currency in the world. Foreign investment hit $4.7 trillion in 20233, while international goods trade jumped another $537 million in June 2024 alone4. To date, Australia’s overall international trade is worth 48% of its GDP.

Just 7% of respondents transact through a specialist money transfer provider, citing trust and local presence as the most common reasons (51%).

Almost a third (31%) said they prefer accessing ‘people on the ground’ in Australia over an online service, which potentially offers support staff offshore.

30% don’t like to switch to new service providers they are not familiar with. A small percentage (15%) get preferential rates through their bank, and a similar proportion (14%) like to do all their banking in one place.

Money Transfer Australia founder Alon Rajic said in 2023-2024, Australian businesses closed down at almost the same rate as new ones opened.

“In the volatile economy of the past few years, it makes good sense for businesses to identify where they could further cut costs,” Rajic said.

“It is understandable that business owners want to stick with a money transfer service they know and trust. What many people don’t understand is that some non-bank money transfers specialists, such as TORFX and OFX, have been in business for as long as 20 to 25 years. They are ASIC-authorised, well-established and reputable.”

Rajic said 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 mid-market rate. It pays to shop around.”