The ACCC has commenced an inquiry into the supply of foreign exchange and conversion services to small businesses and consumers.
Background
This inquiry is focused around terms of reference listed below so as to allow for a comprehensive review of the foreign exchange sector:
the pricing of and costs associated with supplying foreign currency conversion services;
the nature and extent of competition between existing suppliers of the services;
the existence and extent of any barriers to entry and/or expansion; and
whether there are factors limiting the ability of consumers to effectively compare services and prices.
The ACCC has also expressed a willingness to go beyond these terms of reference if they believe it necessary.
The ACCC is looking into currency conversion services (such as over the counter foreign currency purchases, pre-paid foreign currency cards) and the use of Australian bank-linked debit and credit cards for foreign currency purchases as well as fund transfer services between different jurisdictions and currencies.
Issues Paper
The ACCC has released an issues paper alongside its announcement of this inquiry. This document considers the issues and areas of interest to the ACCC in relation to the terms of reference.
Pricing of foreign currency conversion services - The ACCC intends to review the current pricing methodologies for currency conversion and transfer services. ACCC will review how currency service providers set retail exchange rates, the fees being charged, the amount of each fee ‘type’ charged, and how and why these fees may change depending on the provider, method of currency supply and the service provider’s operating model.
Costs to supply currency conversion services - The ACCC intends to examine how currency service providers determine their pricing and margins. The ACCC will focus on why some suppliers are capable of consistently maintaining high margins on services despite competition in the market. There is also consideration of developing business models and shifts to ‘peer-to-peer’ foreign exchange services. Although recognising that it may be difficult to compare traditional service providers with the emerging foreign exchange services, the ACCC is seeking information on how the markets operate in order to better understand the costs of service provision and how these costs may be passed on to consumers.
Competition between suppliers - The ACCC intends to review the market dynamics involved in foreign currency exchanges and any barriers to entry and expansion for new currency service providers. As there is a complex regulatory environment for currency service providers to operate in, involving wide ranging compliance with the Corporations Act 2001 (Cth), Australian Securities and Investments Commission Act 2001 (Cth) and the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), the ACCC is interested in how smaller service providers and those wishing to enter the market comply and respond to the legislative burdens they face.
Communication of prices and ability for consumers to compare services - The ACCC notes that it receives complaints from consumers in relation to the mark-ups, fees and charges associates with currency conversion services. These range from consumers not being aware of the fees being charged up front, that there is a mark-up or fee included in the prices paid for currency conversions, and in some instances, questioning the validity of ‘no fee’ claims for currency conversions.
The ACCC’s Inquiry into foreign exchange services is taking a broad and almost boundless look into the behaviours and practices of foreign exchange service providers with a clear emphasis on the consequences for small businesses and consumers. This inquiry appears to be framed as more explorative of the industry rather than based as a hunt for any specific misconduct.
If you would like us to assist you with making a submission to this inquiry, please contact Richard Beissel or a member of our Corporate and Commercial team. Submissions are due on 22 October 2018.