However, research carried out by Wise, the global technology company building the best way to move money, shows that financial providers continue to make it difficult to find or hide fees in inflated exchange rates.

The Cross-Border Payments Regulation 2, a landmark piece of legislation that directly called for banks to enforce transparency, came into effect in 2020. This required that “all currency conversion charges are shown in a clear, neutral and comprehensible manner” ahead of making a transfer to another currency in Europe. This means that any cost needs to be disclosed.

Typically, the cost of a transaction consists of two components: an upfront fee and a currency conversion fee, included in an inflated exchange rate. The new regulation aimed to stop the latter practice and lead to increased transparency for consumers moving money across borders within Europe. But three years in, 92% of the banks analysed by Wise exploit loopholes in the law and remain opaque about their currency conversion fees. This ambiguity represents a billion-pound bill for both consumers and businesses in the UK, who lost £5.6bn to hidden fees in 2022 alone.

Out of the 25 banks analysed, 20% don’t show any information about the exchange rate used at the moment of making the transfer. 72% show an exchange rate that is not the mid-market rate, but their own inflated exchange rate. This added mark-up is not communicated as a cost to the consumer. It is common practice in the industry to advertise low or even zero fees, while in reality banks are hiding an additional fee in an inflated exchange rate.

Only ING branches and Starling Bank are fully transparent and disclose all fees. 12% of the banks analysed show varying levels of transparency, but are not yet fully transparent: in some cases, banks calculated the real cost of the transfer but hid it behind a tooltip. In other cases, they explicitly communicated the currency conversion fee as a cost but didn’t use the mid-market rate or the exchange rate offered by the European Central Bank.

Almost half of the analysed banks (40%) are not transparent about the exchange rate used and only show either the total amount to be transferred or the upfront fee. To make matters worse, 16% of the providers are not clear about any of these parameters at all.

This is a situation that regulators have been aware of for a while. For instance, in a letter sent to EU Member States in spring 2021, a year after the regulation came into force, the European Commission said “that some payment service providers are not disclosing the estimated currency conversion charges to payment service users” and urged national authorities to report specifically on the situation in each country.

The fact that some banks act in accordance with the Cross-Border Payments Regulation and disclose information in a clear way to their customers proves that this is an attainable goal. Transparency will allow for a truly competitive market to emerge, one where consumers hold all the power to accurately compare providers and find a deal that best suits their needs.

Magali Van Bulck, Head of EMEA Policy at Wise, explains: “Banks continue to exploit loopholes in EU regulation to mislead their customers and overcharge them through fees hidden in inflated exchange rates. Unfortunately, that’s still far too common across the UK and EU, leading to billions lost in fees.

“At Wise we celebrate that big traditional banks like ING are now implementing the rules to become fully transparent. There is no reason why other banks couldn’t do the same. Without transparency, consumers cannot compare services and fees, which reduces competition and keeps prices high.”