Wise says costly bank fees are hindering international growth for NZ’s small businesses, with hidden FX charges a key issue

Banks aren’t supporting New Zealand’s small to medium enterprises (SMEs) enough when it comes to cost-effective international expansion.

That’s according to new research out of global payments company Wise. It has released a survey on issues NZ SMEs are facing around international payments when looking to expand overseas.

The survey of 533 NZ business owners with less than 100 employees found a third of respondents were operating overseas, or have plans to do so. 

However, almost half of those taking steps to expand internationally (42%) were being held back by the cost of international payments.

The majority of NZ SMEs use a traditional bank provider for their international payments. Wise says it’s concerning that 17% of NZ SMEs are using a traditional bank because they believe it’s the most cost effective option when hidden FOREIGN EXCHANGE (FX) fees remain a “common practice” amongst New Zealand’s major banks.

Wise’s NZ Country Manager Tristan Dakin says the lack of understanding around fees is a “huge problem” being reflected in the amount being spent on FX fees.

“Kiwis aren’t shopping around for a better deal,” he says.

Wise’s survey found a third (33%) of NZ SMEs already operating overseas estimate they spend up to $5,000 a year on international payment fees alone, and 39% of respondents say they spend more than  $5,000. 

Dakin says international transfers with Wise are about four times cheaper than with banks and 63% of payments overseas through Wise are instant. Wise classifies instant as being within a timeframe of 20 seconds.

Wise charges via the mid-market currency exchange rate, the currency exchange price set by financial market not banks. Wise says hidden markup fees on international payment transfers via banks can range between 3% to 5% of the total transaction amount.

91% of respondents in Wise’s survey thought it should be illegal for banks to hide their exchange rate markups.

'Valuable reform'

Wise, which competes with banks, told the parliamentary banking inquiry in a submission "valuable reform" following overseas leads in international money transfers could help reduce prices, bringing more efficiency to the New Zealand banking sector and economy more broadly.

"We recommend that the Parliamentary Finance and Expenditure Committee build on this work by the Commerce Commission [in its personal banking services market study] by making an examination of international money transfer a key pillar of its inquiry into banking competition," Wise said.

According to Wise, the majority of banks aren’t transparent about the exchange rate mark-up on international transactions. Banks are not legally required to use the mid-market rate, or any specific rate, when exchanging or sending across different currencies.

Jack Pinczewski, Wise’s Asia Pacific Government Relations lead, says NZ banks, like banks around the world, are “hyper-focused” on their domestic geographies but a one-size-fits-all approach doesn’t meet the needs of different bank customers.

He describes hidden markup fees as a “massive drain on the hip pocket” and says banks can charge more on the low level of understanding around international payments.

NZ is an important market for Wise and the survey highlighted some of the “friction points” local businesses face when they use traditional banks, Dakin says.

Wise has been in New Zealand for six years and he told interest.co.nz the company has been growing “pretty consistently” year-on-year here with around 6% of New Zealanders now using the platform.

Since its inception in 2011, Wise has transferred hundreds of billions of dollars around the world.

The firm now provides global payment transfers to more than 160 countries in 40 currencies. In its 2024 financial year, the company processed £118.5 billion (NZ$253.5 billion) worth of payments by 12.8 million people and businesses. 

According to the firm, this saved Wise customers a total of  £1.8 billion globally (NZ$3.8 billion) in the 2024 financial year.