Wise flags hidden forex markups in remittances

Global payments company Wise is engaging in talks with the Bangko Sentral ng Pilipinas (BSP) to enhance the transparency of remittance pricing in the Philippines, specifically focusing on foreign exchange markups that may go unnoticed by customers. Wise Philippines' country manager, Areson Cuevas, highlighted that increasing transparency is one of the most significant obstacles in reducing the expense of international money transfers, even with existing regulations from the BSP that mandate financial institutions to disclose remittance charges.

During a roundtable discussion, Cuevas emphasized that Wise is actively involved in discussions with central banks and other regulators worldwide to advocate for policies that promote transparency in cross-border payment costs. Wise already has a dedicated team working with central banks and regulators globally to push for policies aimed at making international payment costs more transparent.

According to Cuevas, while the BSP already has regulations requiring financial institutions to disclose relevant information about remittance transactions, Wise seeks to raise awareness and improve the execution of these regulations across the industry. Under Section 298 of the BSP's Manual of Regulations for Banks, banks offering overseas remittance services must disclose the transfer or remittance fee, exchange rate, and exchange rate differential or spread to both senders and recipients.

The exchange rate differential or spread, as defined by the regulations, refers to the foreign exchange markup, or the disparity between the BSP's reference or guiding rate and the exchange or conversion rate provided to customers. Wise is not looking to establish a completely new framework but is seeking greater transparency under the regulations already in place.

This push comes as Wise estimates that Filipino consumers and businesses lost around P50 billion to foreign exchange markups on cross-border transactions in 2024, primarily due to average costs of 3-5 percent, compared to Wise's average charge of about 0.5 percent. The P50 billion loss estimate includes approximately P10 billion in losses for personal customers and roughly P40 billion for businesses, based on Wise's independent studies.

Wise attributes the loss to a lack of consumer awareness, with only 21 percent of Filipinos aware that remittance transactions might include foreign exchange markups. Cuevas stressed that improving transparency is crucial as it ensures that central banks and other global institutions understand the need to make customers aware of the costs associated with their remittances.

Wise is also exploring the expansion of its digital payment options in the Philippines, having introduced Google Pay integration last year. Currently, they are considering adding Apple Pay to their list of supported digital payment options, though they did not provide a specific timeline for the launch.