International fees are restricting Scottish SMBs from entering new markets in 2024

Wise has teamed up with Edinburgh based business The Cycling Academy to shine a light on the costs they face operating internationally with hidden fees.

Last year, UK SMBs lost £2.8bn to hidden international banking fees according to new research by Wise, the international money account - and the problem is being made worse by weak legislation, that could be fixed without costing taxpayers a penny.

New research, which surveyed over 1,500 UK small business owners nationwide, has shown a third (33 per cent) of SMBS in Scotland want to enter new markets in 2024 but 32 per cent are being put off due to the high cost of international banking services - meaning it’s a greater barrier than regulation (25 per cent), supply chain issues (21 per cent) or tariffs (22 per cent). 

Worse, the complexity of international payments is preventing the majority of SMBs in Scotland (84 per cent) from expanding further.  

While much attention is paid to the barriers facing SMBs looking to expand abroad, relatively little is given to that posed by international payments. Yet it’s a barrier created by the expensive, complicated and slow services that currently dominate the market.  

The situation is made worse by poor regulation. Time-strapped SMBs are unable to easily compare the market. 

This is due to a ‘corporate opt-out’ which means that banks don’t have to apply existing, albeit patchy, payments transparency regulation to SMBs. This makes it easy for banks to hide their fees in the exchange rate, and rip off SMBs.

Last year, UK SMBs lost £2.8bn to these hidden fees. In total, consumers and SMBs lost £4.4bn to hidden fees.

Wise is calling on the government to End the Opt Out, and for regulation to be further tightened to ban hidden fees for businesses and as well as consumers for good.  

This change, which won’t cost the taxpayer a penny, will make the sector far more competitive, allow SMBs to easily compare the market and unlock growth for business owners across the UK. A petition has been launched here.

Entering new markets in 2024

The issue is hampering growth, costing jobs and increasing prices at a time when businesses and consumers need all the help they can get.  

The research found that if the cost of international banking services were to be reduced, 33 per cent of SMBs in Scotland would enter new markets including the EU (37 per cent), North America (45 per cent) and the Middle East. (34 per cent).

Nearly a third (31 per cent) would hire more staff and just under a fifth (18 per cent) would reduce the price of their goods and services.

Based in Edinburgh but operating on an international scale, The Cycling Academy is a unique development program aimed at bridging the gap between aspiring young cyclists aged 16 to 18, and the world of professional road racing.

Operating across Europe the company must manage its need to pay in multiple currencies from Euro to Danish Krone to Canadian Dollar as the team races in Belgium, Italy, Spain, France or Canada.

Peter Ellen, director, The Cycling Academy who is backing Wise’s End The Opt Out campaign, said: “Some 90 per cent of professional cycling opportunities in road cycling are in mainland Europe, so to develop career pathways we have to go to races in the EU and impress pro team scouts.

“These European racing programs involve multiple costs to manage including booking accommodation, buying food and other travel expenses, whilst on a very tight budget.  

“We need to know our exact costs because operating as a not-for-profit means that every single penny counts, so hidden charges from banks would completely disrupt our cash flow and impede our ability to race. That’s why we are supporting this campaign from Wise to End The Opt Out to ensure that SMBs like ours get complete transparency when it comes to cross-border payments.”

Magali Van Bulck, Head of EMEA Policy at Wise, said: “For too long, financial providers have been charging grossly unfair fees and inflated exchange rates. This needs to end now, and the government can do so without costing the taxpayer a penny. Everyone loses out to hidden fees, but the problem is most acute for SMBs.

“Existing legislation is weak and patchy, but it doesn’t even apply to SMBs due to a corporate opt-out. This drives up costs, dims competition and costs SMBs money, growth and opportunity. It’s time to end the opt-out, tighten legislation - and put a stop to hidden fees once and for all.” 

Two thirds (66 per cent) of the Scottish SMBs surveyed agreed that the opt out should be removed and the majority (82 per cent) said that regulation should encourage banks to be transparent about international payment costs.

Steph McGovern, host of The Rest is Money podcast and small business owner, is backing Wise’s campaign.

The Rest is Money will this week release a special episode, supported by Wise, looking at how SMBs can expand internationally.