Forex transfer firms give pricey UK banks a run for their money
By Patrick Graham
LONDON (Reuters) - Working out of a shared office near London's Euston station, Michael Kent is part of a revolution that may be driven on by this year's row over alleged currency market manipulation by major banks.
Kent's online business, Azimo, and more than 30 others in the United Kingdom are building on the success of firms like Western Union (WU.N: Quote) and MoneyGram International MGI.O in carving out a chunk of the market in international money transfers, travel money and card payments.
Their pitch is simple: in the era of electronic money, the 4-12 percent fees banks charge consumers for any transaction involving foreign currency is ludicrously expensive.
Today, to transfer 100 pounds to Germany, British high street bank Halifax would charge 9.5 pounds and use a rate 3.06 eurocents per pound worse than those the financial world's biggest players charge each other, totaling around 12 percent.
Halifax points to the costs of running secure, wide-ranging operations and says the percentage falls for larger amounts.
Currency market majors HSBC and Barclays charge less and costs on foreign currency transactions on credit cards often go below 5 percent, but the fee at Azimo is 1 pound, the spread less than 1 cent, and the overall cost less than 2 percent.
"This is money that the banks do not need to charge people and we just set out to change that," says Kent. "We are in the middle of a worldwide downturn and these people are making supernormal profits. It is money people do not need to pay."