The FCA aims to increase transparency on international money transfer quotes

The Financial Conduct Authority (FCA) has released guidance highlighting its expectations around levels of transparency from firms that offer international money transfers. 

Opaque international payment quotes

The FCA’s recent review of international money and cross-border payment services revealed significant discrepancies in the ways that firms disclose costs to their customers. 

Now that the Consumer Duty regulations are in effect, the regulator wants to establish clear standards for price transparency around charges levied in international money transfers.

 The FCA states in its guidance:

“We have seen differences in firms’ transparency on the cost of international money remittance and cross-border payments.”

These differences often leave end customers unable to make proper cost comparisons or to fully understand what they’re paying for this service. 

The guidance applies to firms that are authorised under:

• The Financial Services and Markets Act 2000 (FSMA)
• The Payment Services Regulations 2017 (PSRs)
• The Electronic Money Regulations 2011 (EMRs)

More specifically, it targets payment services that involve currency conversions, which are offered to retail customers.

What do the Consumer Duty regulations say about transparency?

The Consumer Duty regulations, which took effect on July 31, 2023, require firms to:

• Communicate information in ways that are clear, fair and not misleading
• Meet customers’ information needs comprehensively
• Present information that customers can readily understand
• Provide details that enable proper informed decision-making

For international payments specifically, the FCA has examined whether firms disclosed:

• Transfer amounts in pounds sterling
• Applied exchange rates
• Recipient amounts in local currency
• Markups above reference rates
• Variable and fixed transaction fees
• Total remittance costs

Promlematic practices

The FCA highlighted several concerning practices, saying that:

“Transaction fees were not always clearly displayed, and additional fees, such as those charged by intermediary banks, were often not displayed up front”

Other issues included:

• A Lack of clarity around variable fee structures
• Essential cost information was buried away in hard-to-find locations
• Misleading “zero fee” marketing was used when markups were still applied
• The incomplete disclosure of total transaction costs
• A failure to proactively inform consumers about potential intermediary bank charges

What actions should firms take now?

The FCA expects firms to:

1. Review existing customer communications regarding international payment costs
2. Ensure all fees, including markups and third-party charges, are clearly disclosed
3. Implement regular monitoring of communication effectiveness
4. Make the necessary improvements to achieve consumer transparency

The FCA said in the guidance that :

“We expect firms to review the information they provide to ensure consumers can understand the costs they will incur, compare choices, and make informed decisions.” 

Will there be follow-up regulatory actions?

Yes, there will be.  The FCA has said it will use:

“Regular engagement with firms to reinforce our expectations” and to “identify gaps in compliance.”

And added that it’s:  

“Likely to undertake future work in this area, to understand what improvements have been made.”

While the FCA’s guidance focuses primarily on digital communications, the principles set out within it apply across all customer channels, including telephone and in-person services.

What’s the bottom line for money transfer firms?

Transparency in international payment costs is now a regulatory priority. 

Firms must ensure that consumers understand exactly what they’re paying before they commit to transactions.

Those firms that fail to meet the new standards could expect to face increased scrutiny or enforcement under the Consumer Duty framework.