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Small customers still getting raw deal on foreign exchange, says OzForex
Saturday, 12 June 2004
Small businesses and consumers are STILL losing millions of dollars in foreign exchange transactions each year by dealing through Australia's uncompetitive mainstream providers, according to one of Australia's fastest growing provider of online foreign exchange services, OzForex (www.ozforex.com.au).
As a result, thousands of Australian SMEs, expats and migrants have been flocking to alternative providers such as OzForex for fairer deals and better service.
Managing Director of OzForex, Mr Matthew Gilmour, recently conducted a simple test to shed light on the plight of smaller foreign exchange customers.
OzForex canvassed exchange rate quotes from six major providers to buy 50,000 Euros (approx A$85,000) to send by telegraphic transfer. The results showed the best provider on the day charged a margin of around 1.35 per cent on the underlying "Interbank" rate, with the worst provider charging a margin of over 1.95 per cent.
In dollar terms this adds A$1,173 and A$1,682 respectively to the cost of the transfer. In contrast, a specialist provider like OzForex would generally offer margins less than 0.8% against the Interbank rate, and often significantly lower for corporate clients. This translates to an approximate saving of between A$500 and A$1,000 versus the best and worst provider respectively.
OzForex conducted a similar survey in November 2001. Three years later the banks' profit margins remain virtually unchanged - demonstrating that mainstream providers continue to focus on their very large customers at the expense of the small to medium sector.
"Thousands of small and medium-sized businesses around Australia are doing exactly these sorts of transactions through their banks every week, often resulting in thousands of dollars extra cost each year," Mr Gilmour said. "For the privilege they get to stand in queues and deal with staff who often know little about foreign exchange."
Sydney-based OzForex has effectively become the 'Aussie Home Loans' of the foreign exchange industry. Since its launch in April 1998, OzForex has grown strongly and is now one of the world's leading online foreign exchange services, with over 300,000 visitors per month and serving over 12 million page views per year.
OzForex now operates in the Australian, UK and NZ markets and has over 6,000 transacting customers globally.
The company employs a blend of technology and tailored customer service to bring a better deal to smaller customers. "Whilst we use the Internet and technology to provide 'on demand' information and dealing facilities, we focus on delivering a 'high touch' approach to customer service which makes our service unique in the online financial services industry," Mr Gilmour said.
OzForex's growing client base includes small and medium-sized businesses that import and export goods, as well as migrants and expatriates moving countries, and individuals investing overseas who want to hedge their investments against currency movements.
The Australian Bureau of Statistics estimates there are 1.4 million export movements and 7.8 million import movements per year in Australia alone.
In terms of migration, during 2003 there were more than 90,000 permanent arrivals in Australia, and over 50,000 permanent departures. And according to Australian expatriate organisation Southern Cross Group, there are currently more than 860,000 Australian citizens living abroad.
Mr Gilmour said that unlike the share market, where investors big and small have access to the same price to buy or sell shares, foreign exchange is not a level playing field.
"Generally only the banks know exactly where the 'real' market is, and price transparency depends very much on where you are in the food chain," he said. "Larger corporate and institutional customers can see and deal at professional market rates - but smaller customers have little idea where the real market is. While it is fair that smaller volume deals attract a different price, most customers would be shocked at the size of these margins and the dollars involved."
OzForex has three main businesses streams:
- OzForex - provides foreign exchange services to Australian SMEs and any individuals wanting to transfer money overseas;
- NZForex - provides foreign exchange services to NZ SMEs and any individuals wanting to transfer money to or from New Zealand;
- Tranzfers - An expatriate-focused currency transfer service catering to the hundreds of thousands of Australians and Kiwis who live and work abroad.
OzForex also has a range of affiliations with leading industry associations whose members need to transfer funds - for example the Australian Gifts and Homewares Association and the Migration Institute of Australia - offering discount services to their association members.
For further information go to www.ozforex.com.au
For an emailed colour photo of Matthew Gilmour, or for further comment, contact: Philippa Honner, Honner Media, 0407 939 543 or philippa@honnermedia.com.au.