Exploring the Reasons Banks can Keep Hiding Forex Fees, Despite the Data Being Readily Available
Just twenty years ago the information age was on the verge of an unprecedented expansion. The World Wide Web already existed, and real-time data could be accessed through a limited number of channels, but the instant communication of every financial event was still a few years away.
Economic predictions were understandably optimistic about the effect the accessibility of this data would have on the layman. From an age in which the average working man had little to no understanding of the inner workings of the banking centre, we moved to an era that over and over again stifles the attempts of big banks to hide what they don’t want the public to know.
In the Forex sector, it had been especially easy for banks to fool customers. Most banks boasted no fees on currency exchange. However, hefty fees and commissions were in fact in place. They simply passed them off by giving customers “competitive” exchange rates that were actually inferior to real currency prices.
The Google effect
Google has made it especially easy to access exchange rates in real time. Simply by typing in “dollar to pound”, we are presented with the exact rate, to the penny. When banks propose a rate to us that is significantly different, we know immediately – thanks to the cloud.
But somehow banks still manage to pull this magic trick off. They still offer exchange rates vastly inferior to the mid-market rates that are so easily accessible. Hidden fees and commissions are still standard. So why are most customers still blissfully ignorant that they’re being ripped off?
Banks have revolutionised customer service
Even millennials remember a time when banking involved going into a branch and waiting for hours on metal chairs. They went through it with their parents, who passed on a deep hatred of the vast inconvenience and frustration of the process.
When online banking became possible, the great burden was lifted. Banking was no longer an arduous process. With mobile banking apps, it’s now a easier than we imagined it could be. The average person has become more trusting and less daunted by banking, but still remembers how it used to be. Convenience is a game-changer in everything these days, but in this sector it takes the cake.
It’s no wonder that banks have put tremendous effort into creating some of the most user-friendly, functional cloud-based apps around. Everyone who does not know better, will forego research on hidden costs for the great convenience of instant banking.
Forex controls are treated as mysterious forces
To prevent further inquiry into the workings of Forex, banks keep an aura of mystery around how it actually works. In reality it is quite straightforward, and all the information is publicly available in layman’s terms.
But when a bank tells customers that they get the most competitive rates, the layman happily assumes that there are obstacles – such as Forex controls – that make it impossible to do better. They see the difference between the bank’s rates and those available from a Google search, but believe there is a legitimate reason for the difference.
However, perhaps the most significant factor that keeps the layman in the dark has nothing to do with a bank’s intervention. There is a disillusionment that comes from the overwhelming amount of data that is out there. Every aspect of our financial processes is in doubt, and to acknowledge that implies a whole lot of work in figuring out how systems work.
Most people would rather trust their bank than face the encumbrance of the research believed to be necessary to make the most of their transactions, even when it’s staring them right in the face.
The public’s selective memory
The veracity of this phenomenon was displayed clearly in a very different, but even more urgent, domain. When John Oliver asked the average American on the street if they knew who Edward Snowden was, barely anyone remembered. This despite, and maybe because of, the importance of Snowden’s sacrifice – he had proven that their privacy was entirely compromised. It was just too big for the regular, non-political individual to worry about.
Yet this should not be the case when it comes to something as simple as foreign exchange. With minimal research, anyone can find out the enormity of the potential losses. You can lose as much as 13% on Forex on a round trip. That’s £130 you’re paying for the bank to transfer an amount of £1000.
It’s easy to find other options
Transferwise went as far as stripping down to their underwear, in order to bring the hidden manipulation of the banks to the public eye. Their campaign in New York in February this year was in advance of their coming to America.
What they made clear, is that there is no longer any reason anything should be hidden from the public. And, not only is the information there for the taking, so is the solution.
There should be no complaints from the public about the process being difficult or overwhelming. Companies like Transferwise have truly made Forex easier than using a banking app. It’s also a lot quicker. Fees are in the range of 0.5% – 1%. A far cry from the potential 13%.
A similar case is the peer to peer UK lending sector – a sector that has been helping small businesses get access to quick and easy loans and also create business opportunity for investors to diversify their portfolio.
Forex should be demystified
It’s important that the financial sector as a whole should be demystified, but the simplistic processes of Forex are a good place to start. The information age and everything that comes with it – cloud technology, fintech, mobile technology, etc. – should be empowering the average consumer, not leading to that all-too-prevalent malaise.
It’s not just in order to save money in the long-term. Banks need to be held accountable to their dishonest practises. And it’s not enough that economists and major players do so. If the average customer is all-too-willing to be taken in by banking jargon, banks will continue making money that, for them, justifies the ruse.
There may be reasons that in an age of instant information and communication the majority can still be so easily fooled. But it’s not inevitable. Starting small, we all need to learn not to let ourselves be taken advantage of.
Only then will today’s convenience be worth it.