Consumer Duty: International payment pricing transparency – good and poor practice

We have seen differences in firms’ transparency on the cost of international money remittance and cross-border payments. We are sharing examples of good practices so firms can improve how they help consumers understand how much they will pay.

The Consumer Duty (‘the Duty’) sets a new standard of protection for retail consumers across financial services. It came into effect from 31 July 2023 for new and existing products and services. It applies to firms providing products and services to retail customers, as set out in our Consumer Duty Final Non-Handbook Guidance for Firms (FG 22/5).

The examples of good and poor practice below will be relevant to firms authorised under the Financial Services and Markets Act 2000 (FSMA), the Payment Services Regulations 2017 (PSRs) and Electronic Money Regulations 2011 (EMRs), for payment services offered to retail customers when those services involve a currency conversion. 

Under the Duty, firms must communicate information to retail customers in a way which is clear, fair and not misleading, as set out in our Handbook (PRIN 2A.5.3R). The Duty also requires firms to act to deliver good outcomes by ensuring that their communications:

• Meet the information needs of retail customers.
• Are likely to be understood by retail customers.
• Equip retail customers to make decisions that are effective, timely and properly informed.

We reviewed the websites of a sample of firms offering UK customers international money remittance and cross border payments. We assessed whether firms’ communications gave clear pricing information before a transfer was initiated. We also looked at how firms interacted with reference rates. A reference rate is a benchmark rate used by a firm to calculate its pricing.

We looked at whether firms provided the following information:

• The amount to be remitted or transferred (in GBP).
• The exchange rate that will be applied.
• The amount a recipient receives (in local currency).
• The markup above the reference rate.
• Any variable fees.
• Any fixed fees, per transaction.
• The total remittance fees.

The examples below focus on communications to customers prior to them making international money remittance and cross-border payments. The examples do not cover other consumer-initiated payment services involving a currency conversion (like purchasing travel money cards or withdrawing funds from an ATM). The principles underlying them apply regardless of the method of communication, for example by telephone and in-person as well as through digital means.

While some firms were clearly displaying the amount recipients would receive based on the amount remitted, as well as detail of fees and charges, this was not universally the case. We found:

• Transaction fees were not always clearly displayed.
• Additional fees, such as those charged by intermediary banks, were often not displayed up front. An intermediary bank acts as a bridge between the sending and receiving bank.
• It was not always clear fees could vary.
• Relevant information for consumers was not always easy to find.

These issues make it challenging for consumers to compare prices and make informed decisions.

We have set out good and poor practice under the headings below.

Good practice

Clearly displaying all the following information to consumers before they commit to the transaction:

• The amount being remitted or transferred, in GBP.
• The exchange rate applied.
• Where firms present a conversion rate inclusive of a markup, they clearly explain this to the customer.
• Firms communicate markups above their reference rate as a cost to the consumer.
• Variable fees*.
• Fixed fees per transaction*.
• Total remittance fees, in GBP.
• Amount recipient receives, in local currency.

* Where applicable, intermediary and recipient bank fees are explained

Poor practice

• Firms not providing clear and full costs prior to the consumer committing to the transaction.
• Firms not clearly communicating their conversion rate contains a markup on top of the reference rate.
• Unclear communication that the markup is a cost paid by the consumer and retained by the firm.
• Highlighting the absence of a fixed fee as a ‘zero cost transaction’ despite charging a markup.
• Firms not providing clear disclosure on the overall cost of the transaction, including any markups that may be applied to the exchange rate.
• Firms not proactively informing consumers that intermediary or recipient bank fees may affect the final payment amount, leaving the consumer to discover this after the fees have been incurred.
• Firms displaying good practice pricing information, but with some elements difficult to find. For example, requiring consumers to scroll to the bottom of the landing page or click elsewhere to find information about intermediary or recipient bank fees. 

Below, we set out examples of good and poor practice. In each scenario, a customer is entering the transaction with 100 GBP. The reference rate in every instance is 1 GBP to 1.30 USD.

Fixed fees

In these examples, the firm executes the transaction using a reference rate and charges a fixed fee.