Top Australian Banks Join Forces to Accelerate Money Transfers
On the next Australia Day (January 26), a group of 13 Australian banks and financial institutions will launch their own payments platform to compete with popular money transfer apps from non-bank providers. Consumers in Australia have historically waited a day or so to send money between banks, but the new service, which was developed by New Payments Platform Australia (NPPA), enables transfers in real time. Another improvement is a streamlined interface that attaches accounts to simpler identifiers, like an email address or mobile phone number, instead of making users type in routing (known as Bank-State-Branch, or BSB, numbers in Australia) and account numbers for every transaction. Senders will also be able to attach longer messages to their transfers.
The project was conceived of five years ago when the Reserve Bank recognized that leading banks in other countries were moving in the direction of a unified payments platform. For example, top US banks recently adopted a commonly branded app known as Zelle. NPPA chief executive Adrian Lovney stated, "Our basic payments infrastructure needed an upgrade to enable a shift from batch or overnight account-based payments to immediate payments, and this could only be done with a whole of industry approach.” With faster payments, however, comes more security risks, so Australian banks will need to be more diligent about identifying, investigating, and preventing suspicious activity.
The Big Four Australian Banks Provide Terrible Exchange Rates
According to a recent study by Consumer Intelligence, a market research firm based in the UK, Australia’s four largest banks (Westpac, CBA, ANZ, and NAB) have been grossly overcharging customers for international money transfers.
Upon conducting a foreign exchange rate comparison, the firm found that these banks applied a markup well beyond that of banks in the US, UK, and Germany; sometimes up to 30 times as much. Markup rates among the big four have risen by a factor of 5 since 2008, to between 4 and 5 percent.
The study was commissioned by Transferwise, a leading non-bank money transfer provider headquartered in London, (read our review of Transferwise here) which might raise a few eyebrows about its objectivity. According to the CEO of Transferwise, Kristo Kaarman, “Around the world, most banks tell their customers that they only pay a small upfront fee for international payments, but in reality customers pay much more through terrible exchange rates.” In self-defense, Commonwealth Bank called its exchange rates “very transparent,” and a spokesman for ANZ claimed that all FX rates are published on the web site and not purposefully hidden.
More Remittances Head South Thanks to US Labor Market Gains
As the US labor market looks up, so do remittances to Latin American and the Caribbean. The World Bank estimates that, in 2017, nearly $80 billion USD will be sent to these regions by migrants living elsewhere, representing an increase of almost 7 percent. This growth exceeds the 5 percent increase in remittances expected across all developing nations (to $450 billion USD), as well as the 4 percent increase anticipated worldwide (to about $600 billion USD). The World Bank also reported some less promising news: The global average cost of transferring $200 USD still hovers around 7 percent, far above the United Nations' Sustainable Development Goal (SDG) of 3 percent.
Safaricom Makes Money Transfer Reversals Easier
M-Pesa, a mobile money transfer service launched in 2007 in Tanzania and Kenya, gets over 10,000 daily calls from customers requesting transaction reversals. In many of these cases, the sender has entered incorrect recipient information and doesn’t want their money ending up in the wrong hands.
To address this issue, Safaricom, a mobile network operator that processes M-Pesa’s transactions, will allow users to undo cash transfers to unintended recipients via text. After the user texts the transaction code to the number 456, a customer service representative will confirm the error with both the sender and recipient before implementing the reversal. This process is currently being piloted among staff and a few customers but should be widely available within weeks.
