Welcome to DU!
The truly grassroots left-of-center political community where regular people, not algorithms, drive the discussions and set the standards.
Join the community:
Create a free account
Support DU (and get rid of ads!):
Become a Star Member
All Forums
Issue Forums
Culture Forums
Alliance Forums
Region Forums
Support Forums
Help & Search
United Kingdom
Related: About this forumRevealed: the huge profits earned by big banks on overseas money transfers
sharing because I love a good dig at Santander.
When senior Santander executives gathered in the principality of Andorra in January this year, the banks innovation director warned that a large chunk of its profits were at risk because the juicy margins it earns on money transfers could be destroyed by new competitors. The documents supporting these claims have since been leaked to Guardian Money, and reveal that Santander made 585m from money transfers equal to nearly a tenth of its 2016 global profit of 6.2bn and that it charges six times as much as rival TransferWise for sending £10,000 from the UK to Spain.
What the documents expose is just how much the big banks are making from giving customers poor exchange rates, with the bulk of their profits coming from the so-called FX margin rather than the fees directly charged. The FX (foreign exchange) margin is the difference between the exchange rates available in the money markets and the rate that a bank offers a customer.
In a warning flashed up on screens, Santanders executives were told: 10% of the groups profits at risk when international transfers repricing takes place. They were told that while TransferWise, a relatively new start-up in the money transfer business, was charging 64 to move £10,000 from the UK to Spain, Santander charged 394 six times as much. New entrants were attacking the profitable slices of its money transfer business, and if the bank charged the same as TransferWise its revenue would collapse from 585m to 95m, a fall of 84%.
The precise breakdown of the figures shows that Santander made 290m from its FX margin, or nearly 80% more than the 163m it earns from the standard fee. It also reveals that, when sending money overseas, there is another stream of revenue that a bank earns, called correspondent banking, which in Santanders case is worth 132m. This is because the bank has to hold less capital as a result of its transfer business.
The precise breakdown of the figures shows that Santander made 290m from its FX margin, or nearly 80% more than the 163m it earns from the standard fee. It also reveals that, when sending money overseas, there is another stream of revenue that a bank earns, called correspondent banking, which in Santanders case is worth 132m. This is because the bank has to hold less capital as a result of its transfer business.
*snip*
Taavet Hinrikus, an Estonian tech entrepreneur, set up TransferWise in 2011 after moving to London to work for Skype, and becoming increasingly infuriated at how much he was being charged to send money home. TransferWise now employs 600 people and claims to have grabbed an 8% share of the UK international money transfer market, shifting £800m a month.
Hinrikus says he was pleased to see Santander namechecking TransferWise in its internal documentation as one of the leading disrupters of the current money transfer market, although he says that all the main banks are overcharging.Its a massive consumer rip-off, but the Santander document doesnt surprise me. What does surprise me, is how long theyve been able to get away with it. This is a major issue three-quarters of consumers who regularly send money abroad cant work out the final cost when fees are factored into the exchange rate. Consumers and businesses are losing £5.6bn a year in the UK because of rate mark-ups.
Hinrikus says he was pleased to see Santander namechecking TransferWise in its internal documentation as one of the leading disrupters of the current money transfer market, although he says that all the main banks are overcharging.Its a massive consumer rip-off, but the Santander document doesnt surprise me. What does surprise me, is how long theyve been able to get away with it. This is a major issue three-quarters of consumers who regularly send money abroad cant work out the final cost when fees are factored into the exchange rate. Consumers and businesses are losing £5.6bn a year in the UK because of rate mark-ups.
https://www.theguardian.com/money/2017/apr/08/leaked-santander-international-money-transfers-transferwise
InfoView thread info, including edit history
TrashPut this thread in your Trash Can (My DU » Trash Can)
BookmarkAdd this thread to your Bookmarks (My DU » Bookmarks)
1 replies, 4123 views
ShareGet links to this post and/or share on social media
AlertAlert this post for a rule violation
PowersThere are no powers you can use on this post
EditCannot edit other people's posts
ReplyReply to this post
EditCannot edit other people's posts
Rec (5)
ReplyReply to this post
1 replies
= new reply since forum marked as read
Highlight:
NoneDon't highlight anything
5 newestHighlight 5 most recent replies
Revealed: the huge profits earned by big banks on overseas money transfers (Original Post)
JHan
May 2017
OP
Ghost Dog
(16,881 posts)1. When I still had UK accounts
I would carry cash to Spain and exchange it here, getting a much better exchange rate and lower commission than in UK, in a Spanish Santander branch for example. It seems Santander in UK merely participates in UK banking culture in general: poor service rip-offs.