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1,9 billion euros loss: In Germany there are hidden fees in excessive exchange rates, high costs for international transactions and expenses abroad by travelers. On behalf of Wise, the economic research company Capital Economics found that consumers and companies in Germany lost 1,9 billion euros last year due to hidden fees on international payments - for example for travel, business, education or supporting relatives abroad.
The hidden fees paid by German consumers as part of personal expenses while traveling amount to 288 million euros. The fees paid for transfers abroad or from abroad to Germany totaled 263 million euros. These hidden fees arise, for example, from exchange rate surcharges when converting currencies for transfers abroad, cash withdrawals or card payments.
German companies even paid around 1,3 billion euros in fees
Small and medium-sized companies (SMEs) paid 1,3 billion euros in hidden fees last year. Many companies are deterred from expanding abroad by the costs and complexity of international payments. The export turnover of German SMEs to third countries in 2021 was over 100 billion euros. The problem could be solved if the market were transparent: it would enable SMEs to make a fair market comparison and promote competition between providers. However, SMEs are currently not protected by transparency regulations in either the EU or Germany.
How do hidden fees arise?
The reason for hidden fees is usually currency conversion, which can cause a significant loss even within Europe. Because a large proportion of payments from the euro area go every day to EU member states that are not part of the euro currency area. For example, migrants transfer around 4,4 billion euros to their relatives in Europe. Poland (557 million euros) and Romania (659 million euros), for example, receive the highest amounts of so-called remisses.
Many banks charge their customers different fees for currency conversion, which they add to the exchange rate - however, this does not correspond to the rate at which the banks themselves transfer funds. Consumers should check whether their bank is transparent about hidden fees: for example, is the “real” exchange rate (the mid-market rate) used, i.e. the currency value without the provider’s margin? A simple Google search is usually enough to check the value.
But it's not just banks that can charge these hidden fees. Travelers should avoid exchange offices - whether at home or abroad - as exchange rates are typically very unfavorable, especially at airports or train stations, and therefore less money is exchanged. The situation is similar when withdrawing money abroad. Depending on the credit institution and card, foreign currency and international fees may apply.
Magali Van Bulck, Head of Policy & Campaigns (EMEA) at Wise, explains: “There is a lack of transparency in the financial sector. But this lack of transparency is the most important factor in consumer protection. Only by transparently stating the fees do consumers become aware of them and can compare providers. To do this, the gaps in the regulations would have to be closed. We need to get to the point of ensuring fee transparency and educating consumers about alternative payment methods. These measures could be implemented quickly and would effectively reduce costs.”
