Research conducted by Money Transfer Australia has revealed that 62% of Australian SMEs are conducting international trade through the big four banks despite the higher exchange rate mark-ups and fees associated with these institutions. The study highlights that the larger the business, the more likely it is to consistently use the same bank and remain unaware of transaction fees.
The survey targeted 200 Australian SME owners and decision-makers and found that Australian businesses might be significantly overpaying for international transactions. Despite a report from the ACCC indicating that fintech companies offer better international money transfer rates than the big four banks, most businesses are still opting for the traditional banking route. The report noted that although the major banks have removed or reduced flat fees on transfers, the cost advantages of fintech solutions remain substantial.
A detailed examination of the survey data showed that the likelihood of a business using a bank for international transfers increases with the size of the business. Among those with over 200 employees, 74% utilise one of the big four banks, compared to 68% of businesses with 11-50 employees and 45% of micro-businesses. The study also indicates that larger businesses strongly prefer the same financial service provider, with 42% of large businesses doing so compared to 33% of small and medium-sized businesses and 25% of micro-businesses.
Regarding fee awareness, the survey found that while 88% of SMEs know the fees they pay for international transactions and 89% know the currency exchange mark-ups, businesses still favour traditional banks. Only 7% of the surveyed businesses use specialist money transfer providers.
Three key reasons emerged from the survey explaining this preference for banks: trust, local presence, and familiarity. Over half of the respondents (51%) cited trust in big banks as a primary reason, and almost a third (31%) appreciated having local branches and in-person support. Additionally, 30% expressed reluctance to switch to unfamiliar service providers.
Alon Rajic, founder of Money Transfer Australia, commented on the findings: "In the volatile economy of the past few years, it makes good sense for businesses to identify where they could further cut costs. While it is understandable that business owners want to stick with a money transfer service they know and trust, non-bank money transfer specialists such as TORFX and OFX have been in business for as long as 20 to 25 years. They are ASIC authorised, well-established and reputable."
Rajic added, "Being complacent about bank fees or fearful of change can cost a business. Specialist providers don't charge extra fees and offer exchange rates well below the going mid-market rate. It pays to shop around."
Despite lower consumer spending and tightening profit margins, SMEs' willingness to pay higher fees for international trade through banks underscores a preference for familiarity and perceived trust. This trend persists even as Australia sees substantial international trade, with foreign investment reaching AUD $4.7 trillion in 2023 and international goods trade jumping by AUD $537 million in June 2024 alone. With Australia's international trade representing 48% of its GDP, the potential for cost optimisation remains significant for SMEs engaged in global markets.
