Banks may have to rethink their reliance on credit card fees as a driver of revenues as technology savvy travellers are resorting to cash or alternate payment apps to avoid being slugged with high foreign transaction fees and usurious exchange rates.
In a report that should disturb all banks relying on overseas charges as a growing source of revenue, TransferWise said that using a credit card to pay for overseas purchases could cost an average Singaporean as much in fees as a one day holiday in Bangkok. The firm estimates a typical Singaporean would lose as much as $926 (US$650) in additional fees and currency exchange losses.
One way Singaporeans are avoiding hefty credit card fees is to simply use cash, notes a separate study by J.D. Power.
Seventy percent of Singaporeans still prefer to use cold hard cash when making purchases abroad, 50% of the total overseas spending by Singaporeans are still cash-based, the report added.
Lofty transaction fees and poor foreign exchange rates were cited as the two main reasons why they avoid using cards. Singaporeans also fear fraudulent transactions overseas.
Such pain points manifested in the staggering $1.1b lost yearly to fees associated with overseas card expenditure, or 4% of the $27.3b estimated total overseas expenditure that Singaporeans make via cash and cards, a study commissioned by tech company TransferWise revealed.
“Singaporeans are avid travellers, but banks have not provided an affordable, transparent card option for spending abroad, either to individuals or businesses,” says Surendra Chaplot, TransferWise’s head of APAC card product. He noted that banks could still do better in the area of transparency.
“When you book a flight or a room, the airline or hotel tells you how much you are charged, but when you spend your card overseas, banks somehow believe they have the right to hide what they charge by putting their fees in the exchange rate mark-up. This may have been acceptable in another century or decade, but consumers in an age of transparency should and will reject it,” Chaplot added.
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