28 May 2010 6:27am
Several financial institutions have targeted growth in the provision of retail foreign currency and remittance services. In the past month a new online peer-to-peer service, CurrencyFair, has been launched in Australia, Cuscal has signed a service agreement with JP Morgan and Travelex has launched a remittance service in a joint venture with Visa.
All are promising services that are cheaper and more convenient than the established providers.
Travelex director of global sales Graham Perry said the growth in migrant numbers in Australia and elsewhere was turning the foreign money transfer market into a big business.
Perry said: “According to the World Bank there were US$276 billion of foreign money transfers in 2008 and US$2.9 billion out of Australia.”
The new kid on the block, CurrencyFair, was set up in Ireland last year. Last month it received approval from the Irish Financial Regulator to be regulated under the EU Payments Services Directive. It launched its business in Australia on May 7.
Users of the service deposit their funds in a bank account (not controlled by CurrencyFair) and wait for a counterparty to meet their price. The company claims users can get close to the interbank rate and once a deal is done they will get their account credited in two days.
As the business is so new its claims cannot be verified. For the launch CurrencyFair has set its commission at zero but said it would introduce a commission of 0.5 per cent “at a later date”.
Cuscal will offer its credit union and building society customers a new foreign exchange platform operated by JP Morgan. The new service will allow credit unions to offer international transfers.
Cuscal general manager, Adrian Lovney, said about 30 per cent of credit unions do not offer foreign exchange or international money transfer services.
Lovney said all settlement between JP Morgan and Cuscal will occur in Australian dollars, giving credit unions and their customers certainty about their payments.
JP Morgan head of treasury services in Australia, Tony O’Neill, said all transactions would go straight into the JP Morgan system, which would give credit unions the opportunity to offer their customers good spreads.
Travelex’s Perry said current remittance services were expensive. “Our mid range estimate is that it costs about $50 a transaction – $20 to send and $30 at the other end. Some charges are as high as $100.”
Travelex’s new service operates online. Consumers can use Bpay to make the payment. Payments must be made to a Travelex or Visa card. There is no service charge if the transfer goes to a Travelex Visa Cash Passport card and a $9.95 charge if the transfer goes to a Visa debit or credit card.
Perry said: “We estimate that service charges are worth about $400 million a year in Australia. There is room for some competition.”
He said Australia was the test site for a planned global rollout of the service. The switch for the system will be based in Sydney.