Last year, European consumers and businesses lost €30 billion to hidden fees when sending and spending money internationally. The amount increased from €22 billion in 2019. The solution to crack down on these hidden charges is to maintain strong transparency rules through the Payment Services Regulation currently in the EU legislative process.
Hidden fees occur when the market operates with vague and unenforced rules. “Outcome-based regulation” is often mentioned, but when the outcome does not benefit EU citizens, intervention is necessary. Providers hide fees in inflated exchange rates, typically several percentage points higher than the mid-market rate. This lack of transparency leads to a complete unawareness of these hidden charges, creating an information asymmetry that only regulation can address.
Hidden fees are what happens when you leave the market to do what it wants, with vague and unenforced rules.
Wise examined major banks across eight EU markets and found that 29 out of 33 banks (88%) were not transparent with their customers, hiding fees in inflated exchange rates ranging from 0.9% to 4.5%. Transparency is the key to allowing consumers and businesses to compare markets, shop around, and encourage competition for lower prices.
In 2024, misconceptions persist about the importance of international payments. Europeans are highly international, with 9% of the EU’s population living in a different country than their birthplace. Businesses also feel the impact, with roughly half of Europe’s SMEs exporting goods and services outside the Eurozone, making them vulnerable to hidden fees. In the past year, European people and businesses paid €45 billion for international money transfers, with two-thirds of these fees going unnoticed.
Hidden fees are not limited to non-Euro countries; €9 billion was lost within the Eurozone last year. These fees have a significant societal impact, particularly during times of conflict or hardship in receiving countries. The World Economic Forum and the United Nations have recognized the importance of lowering remittance costs and increasing transparency to benefit both consumers and businesses.
In the past year alone, European people and businesses paid €45 billion for the privilege of sending money overseas. But two-thirds of these fees left their wallets without them knowing.
The Cross Border Payment Regulation 2 has not fully addressed the transparency issue, allowing hidden fees to persist. The ongoing negotiation of the Payment Services Regulation presents an opportunity to eliminate hidden fees by requiring providers to disclose exchange rate markups upfront, calculated over a uniform benchmark rate.
The Payment Services Regulation, currently being negotiated, is our chance to eliminate any wiggle room and end hidden fees for good.
The Belgian Presidency can play a crucial role in making financial services fairer by addressing hidden fees and ensuring transparency in cross-border payments.
