UK SMBs losing billions to ‘hidden’ trade barrier: Wise calls for change - and to End the Opt Out

Last year, UK SMBs lost £2.8bn to hidden international banking fees according to new research* by Wise, the international money account - and the problem is being made worse by weak legislation that could be fixed without costing taxpayers a penny. New research by Censuswide, which surveyed over 3,000 UK small business owners** nationwide, has shown that a third (33%) of UK businesses want to enter new markets in 2024 but over a quarter (26%) are being put off due to the high cost of international banking services - meaning it’s a greater barrier than regulation (25%), supply chain issues (22%) or tariffs (19%). Worse, the complexity of international payments is preventing the majority of SMBs (69%) from expanding further. While much attention is paid to the barriers facing SMBs looking to expand abroad, relatively little is given to that posed by international payments. Yet it’s a barrier created by the expensive, complicated and slow services that currently dominate the market. The situation is made worse by poor regulation. Time-strapped SMBs are unable to easily compare the market. This is due to a ‘corporate opt out’ which means that banks don’t have to apply existing, albeit patchy, payments transparency regulation to SMBs. This makes it easy for banks to hide their fees in the exchange rate, and rip off SMBs. Last year, UK SMBs lost £2.8bn to these hidden fees. In total, consumers and SMBs lost £4.4bn to hidden fees. Wise is calling on the Government to End the Opt Out, and for regulation to be further tightened to ban hidden fees for businesses and as well as consumers for good. This change, which won’t cost the taxpayer a penny, will make the sector far more competitive, allow SMBs to easily compare the market and unlock growth for business owners across the UK. A petition has been launched here. The issue is hampering growth, costing jobs and increasing prices at a time when businesses and consumers need all the help they can get. Further research of 1,500 SMBs*** found that if the cost of international banking services were to be reduced:

• Over a third (34%) of SMBs would enter new markets including the EU (58%), North America (42%) and the Middle East (31%)
• Over a quarter (27%) would hire more staff
• Over a fifth (21%) would reduce the price of their goods and services

Steph McGovern, host of The Rest is Money podcast and small business owner, is backing Wise’s campaign. The Rest is Money will this week release a special episode, supported by Wise, looking at how SMBs can expand internationally. Steph McGovern, TV presenter, host of The Rest is Money podcast and small business owner ‘Gootopia’, who is backing the campaign, said:   “As a small business owner myself, I know that operating in the current climate is tough. The fact that businesses are being ripped off when it comes to international payments is not only bad for them - but it’s bad for consumers and the economy. That money could cut prices, create jobs, be kept safe for rainy days or deliver investment. “Our business is operating across various cities in the UK, so we know that this is a problem for businesses up and down the country. “There are so many things that can be done to aid SMB growth. Ending the opt out, and improving legislation to ban hidden fees, is a simple, cost-free way of helping the country’s small businesses. Sign the petition now.” Magali Van Bulck, Head of EMEA Policy at Wise, said:  “For too long, financial providers have been charging grossly unfair fees and inflated exchange rates. This needs to end now, and the Government can do so without costing the taxpayer a penny. Everyone loses out to hidden fees, but the problem is most acute for SMBs. “Existing legislation is weak and patchy, but it doesn’t even apply to SMBs due to a corporate opt out. This drives up costs, dims competition and costs SMBs money, growth and opportunity. “It’s time to end the opt out, tighten legislation - and put a stop to hidden fees once and for all.” Two thirds (66%) of the SMBs surveyed*** agreed that the opt out should be removed and the majority (82%) said that regulation should encourage banks to be transparent about international payment costs.    

*Research commissioned by Wise and independently conducted by Capital Economics in January 2024.

** Based on a poll of 3,000 UK SMB decision makers undertaken by Censuswide - from across the UK polled between August - November 2023.

***Based on a poll of 1,500 small business users surveyed by Censuswide in October - November 2023.