Coronavirus has changed our lives, there’s no denying that. But it’s also changed the way a huge number of businesses operate on a daily basis.
We’re not just seeing SMEs cope with new track and trace systems and social distancing rules. They’re revolutionising the way they make money, moving operations online, and even going cashless to make their business work. So far, their success in adapting and even expanding has been truly inspirational.
The government has said it will do all it can to support our businesses. But there is one simple — and often overlooked — measure which would help supercharge our SMEs and boost the UK’s economic recovery: transparency in foreign payments.
As it stands, banks and money exchange providers can add hidden charges to foreign payments by offering customers inferior exchange rates to the ones they have access to — all the while advertising their service as “no fee” or “zero per cent commission”. This costs our small businesses £4.1bn a year — often without them even realising.
It’s an industry stealth tax on businesses seeking to trade abroad. It’s unfair, and it’s wrong.
The good news is that new regulations designed to end this practice have just come into force across Europe. They lay out revised rules for how financial firms should tell customers what they are being charged for currency conversion, forcing them to show the “total cost” of the conversion when it’s made via bank transfer or card payment.
The less good news is that, although these new rules are well intentioned, they remain deficient in three key ways.
First, they are silent on how banks calculate the so-called “currency conversion charge” which they are still allowed to add, leaving the wriggle-room to continue to add hidden fees.
Second, as it stands, there’s talk of a “corporate opt-out” by some providers. If we don’t want to risk locking out those standing to gain most from transparency (in other words, the smaller and more agile businesses), this loophole needs to be closed.
Third, cash payments are out of scope, meaning that businesses using cash (again, often SMEs) will see no benefit from the new rules.
Luckily, the solution here is simple. By providing clarifying guidance as we adopt these laws into the UK, the British government can effectively and quickly remedy all three problems. Specific rules about how “currency conversion charges” are calculated are a must, as is explicit confirmation that payments by small businesses will definitely be covered. Finally, guidance setting out that cash payments are in scope of the regulations will protect the many businesses and individuals still using cash.
These simple steps would open up more than £4bn of savings to small businesses across the country. This would support our fantastic SMEs post-coronavirus, helping them to grow not only in the UK but to seize the opportunities of trading abroad — all while reinforcing the UK’s reputation as one of the world’s leading places to do business.
Britain’s SME community has adapted to these challenging circumstances with impressive energy and style. Now, the ambitious businesses which don’t just seek to stay afloat but to grow and develop deserve all the help they can get. I hope the Treasury is reading.
Main image credit: Getty