SMBs in Yorkshire struggle to enter new markets due to costly banking services

SMBs across the UK are losing nearly £3bn each year to hidden banking fees.

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

Research which surveyed over 1,500 small business owners across the UK found that 30 per cent of businesses in Yorkshire want to enter new markets in 2024, but 26 per cent are being put off due to the high cost of international banking services - meaning it’s a greater barrier than tariffs (18 per cent) and supply chain issues (24 per cent).

Worse, the complexity of international payments is preventing the majority of SMBs in Yorkshire (75 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.

Put off by lack of payment transparency

Wise has teamed up with Sheffield-based business fit20 to shine a light on the costs they face operating internationally with hidden fees.

fit20, which is backing Wise’s End The Opt Out campaign, is an innovative and unique fitness franchise based originally in Sheffield which provides a science-based alternative to training for only 20 minutes per week. It now operates over 160 franchise studios in 13 countries.

Niri Patel, managing director of fit20, said: “Reviving the UK economy would be so much easier if UK businesses could trade more easily internationally.

“But, we are typically put off of this expansion by red tape and this lack of transparency when it comes to payments.

“Most small businesses are unaware of the amount of money they are losing in undeclared charges everytime they make a cross currency payment and are being completely overcharged by banks.

“This isn’t right or fair and I hope that the government will take note of this campaign and create a more level playing field for small businesses like mine in the future.”

Nearly three quarters (71 per cent) of the Yorkshire SMBs surveyed agreed that the opt out should be removed and the majority (84 per cent) said that regulation should encourage banks to be transparent about international payment costs.

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. 

End the Opt Out

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.

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:

More than a quarter (26 per cent) of SMBs in Yorkshire would enter new markets including the EU (47 per cent), North America (28 per cent) and the Middle East (21 per cent).

A quarter (25 per cent) would hire more staff, and nearly a fifth (19 per cent) would reduce the price of their goods and services.

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.”

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

The Rest is Money has released a special episode, supported by Wise, looking at how SMBs can expand internationally. This is available to listen to here.