SMEs bear brunt of $1.1b surcharge losses

Hong Kong firms suffered an estimated loss of up to HK$1.18 billion in 2021 due to hidden exchange rate surcharges when making cross-border payments, with 99 percent of such loss incurred by small and medium-sized enterprises, according to a survey commissioned by UK fintech firm Wise, formerly known as Transferwise.

The research, conducted by Coleman Parkes Research, took place between January to February 2022, with 200 senior decision-makers who are accountable for overseas payments and foreign exchange transfers in SMEs (100) and multinational companies (100).

Of the HK$1.82 billion cross-border money transfers fees local firms paid in 2021, roughly HK$638 million were spent on transaction fees, while 65 percent - about HK$1.18 billion - were hidden as exchange rate markups on currency conversions when sending money internationally, the study showed.

It also found that 55 percent of businesses are still reliant on old-school methods like bank transfers to make cross-border payments, citing familiarity and trust in their traditional bank as key factors behind their choice. In particular, 63 percent of the SMEs are sticking with traditional banks compared to barely half of MNCs (47 percent).

This may not come as a surprise - after all, small businesses who hardly have time or manpower to thoroughly compare providers would often default to using the same traditional provider for both domestic and international needs, the survey concluded.