When Victoria resident Dick Newson tried to send €1,000 to a friend in France through a money transfer from his Scotiabank account, he didn’t expect it to be a hassle.
“We were able to submit it and it said ‘Done,’ ” said Newson in an interview with CBC News last week. “Two weeks later, our friend said, ‘I don’t have my money yet.’ “
He’s not alone in his frustration, according to one banking researcher, who notes that transferring money internationally can be costly, difficult or confusing if your point of origin is a Canadian bank.
Typically, an international wire transfer requires information including the recipient’s name, the name of their bank and codes including the International Bank Account Number (IBAN), the Bank Identifier Code (BIC) or Society for Worldwide Interbank Financial Telecommunication (SWIFT).
Newson told CBC News he had all the codes required, but was frustrated by the bank’s website, which he found confusing.
“I went to their international money transfer web page and tried to enter all this information and had a lot of difficulty,” he said. While Scotiabank’s website offers the service for $1.99, Newson said he was told that price didn’t apply when he asked for assistance, and he’d have to pay $25 if he went into a branch.
Newson told CBC News via email Monday that Scotiabank had “determined that the money had been deposited, but in a business or corporate account, and not the personal one of our friend.”
In an emailed statement Tuesday, Scotiabank said it’s “working closely with our client to ensure that this matter is solved to their satisfaction.”
But Newson’s criticism is not just that the money is missing. He believes the process to send money internationally should be simpler and cheaper, similar to how Interac e-Transfers work to send money within Canada.
“It should be as easy going through the bank to do the same thing [internationally],” he said.
Canadian banks don’t face much competition
International trade economist Werner Antweiler points out that Canadian banks don’t face a great deal of competition in this country when it comes to handling foreign currency and moving money around the world.
“It’s an oligopoly. It’s only a handful of banks that are in a very cozy spot,” said Antweiler, who is a professor of economics at University of British Columbia’s Sauder School of Business in Vancouver.
“And that means they can keep fees relatively high. Especially those fees that are invisible to most customers.”
While he wasn’t speaking specifically about Newson’s situation, Antweiler pointed out that Canada’s banks don’t have to provide the same level of interconnection that many foreign banks do.
“Right now we don’t have the kind of simplified system, for example, that’s in place in the European Union where transfers are carried out in real time and at a really low cost,” he said.
“Our Canadian banks make it really hard to hold money in a foreign currency,” said Antweilier, noting that issues around transferring money can apply to markets a little closer to home as well.
He noted that while you can have a U.S. savings account at some Canadian banks, you can only deposit or withdraw funds with many of those accounts.
“I cannot actually transact this account in the United States. It is not linked to the U.S. payment system,” he said with regard to his own U.S. dollar account in Canada.
Canadian banks even charge to receive money
Bank charges to send money internationally can be as high as $45 at institutions like RBC.
To receive a wire transfer, banks such as TD Bank will charge $15 — on top of whatever fee the sender had to pay.
The Canadian Bankers Association, which represents both banks, points out that international money transfers come with costs because they’re more complex than domestic transfers.
In a statement to CBC News, the association, which represents more than 60 financial institutions, wrote that the cost to move money internationally remains consistent no matter how much money is sent, “which is why banks usually charge a fixed fee rather than a percentage of the total payment.”
Antweiler points out that currency conversion is just one part of the process, which also includes anti-fraud measures, and he agrees these procedures cost money.
“There are always gonna be transaction fees. But the question is, how high should they be and what is reasonable?”
Antweiler also notes that often, exchange rates offered by large institutions are higher than alternative money transfer systems.
For example, Canadian bank competitor EQ Bank offers online international transfers using a system backed by British financial company Wise. EQ Bank says its exchange rates are typically lower than the major banks, and they make it clear how much it will cost right off the bat.
“I’m gonna send … $300 Canadian … but how much is the recipient gonna receive in their bank account at the end of the day?” said Dan Broten, senior vice-president and head of EQ Bank in Toronto, highlighting his company’s belief that the higher exchange rates of a traditional bank also serve as a type of indirect fee.
“Many customers when they’re dealing with a larger financial institution, it may not be clear to them. It’s actually completely hidden,” said Broten.
Competitors trying to make it easier — and cheaper
Canadian alternatives to bigger banks could see opportunity in targeting clients who send money outside of Canada, and some are advertising cheaper international money transfers for their customers.
Fintech company Wealthsimple recently launched a new suite of products, with some traditional wire transfers being free for several weeks and providing access to a lower cost alternative system, also through Wise.
Wise offers its own accounts, as well as a debit-style card that allows clients to receive and spend in multiple currencies or online. In a statement to CBC News, Wise said average fee it charges is .53 per cent of the money being sent, compared with what the company claims is an industry average of two to five per cent.
The lower cost is part of the appeal for companies like Wealthsimple.
“You know exactly what you’re paying for and it’s gonna be significantly cheaper, or no fees,” said Hanna Zaidi, vice-president of payment strategy at Wealthsimple.
She says her company doesn’t need to charge as much for wire transfers because it just doesn’t have the same costs as a traditional institution.
“We don’t have bank branches. We don’t have all these administrative fees and overhead that we need to deal with,” she explained.
The increased competition may drive the traditional banks to respond, with Antweiler pointing out that there’s more profit to be made as more customers seek international money transfers.
“Entering the market as a new competitor and offering a cheaper product will grab your market share,” he said.
Victoria man’s money still missing
Back in B.C., Newson acknowledges he may just have to play the waiting game, but said he’d like to see banks compete more when it comes to making it easier to send money abroad.
“I just wish banks would step up to that and say, you know, we would like to make it easier.”
However he also noted it’s been more than a month and he still doesn’t have his money back, while his friend in France is also sans l’argent (without cash).
“Scotiabank has done what it can from this end,” he said, adding that he felt the bank “stepped up” to get him additional details to help.
So next time? He says he’ll use a competing service that may not rely on traditional banks.
