We have conducted research into the ways in which foreign exchange (FX) firms may present their costs and exchange rates. The results show us which approaches help consumers shop around and choose the best deal.
Occasional Paper No. 56 (PDF)[1]
Summary
In this study, we tested 3 different practices for presenting cost and exchange rate information in an online experiment with a nationally representative sample of participants. We measured which approach was most effective in helping them to choose the best deal:
- a fixed exchange rate versus a real time, dynamic rate
- requiring consumers to pre-register before receiving a quote (an example of a ‘sludge’, or harmful friction which discourages behaviour that is in the user’s best interest)
- showing a timestamp for the exchange rate and providing a risk warning
We found that the option which showed a fixed exchange rate, did not require registration and provided no warning about moving exchange rates led to the most shopping around and a higher likelihood of choosing the best deal.
Authors
Chris Burke, Lucy Hayes, Cherryl Ng and Laura Smart.
Disclaimer
Occasional Papers contribute to the work of the FCA by providing rigorous research results and stimulating debate. While they may not necessarily represent the position of the FCA, they are one source of evidence that the FCA may use while discharging its functions and to inform its views. The FCA endeavours to ensure that research outputs are correct, through checks including independent referee reports, but the nature of such research and choice of research methods is a matter for the authors using their expert judgement. To the extent that Occasional Papers contain any errors or omissions, they should be attributed to the individual authors, rather than to the FCA.