Stop Press. Banks charge fees!

Card Fees. Annually, the BBC recycles a story on foreign ‘plastic’ spending by UK travellers and the fees they pay.

The latest iteration was last week. I caught it on the evening news, and at the time of writing, it remains on the internet.

The article even links back to last year’s version, written by the same journalist. Last year, Amsterdam, this year Malaga. I wonder where he’s off to next year?

The thrust of the piece is that consumers don’t know that they are paying up to 3% fees on card transactions abroad. When the BBC provided them with this information, holidaymakers were outraged. The BBC asked FairFX, foreign exchange specialists to analyse the figures.

FairFX is one of many foreign exchange companies founded specifically to compete with the banks. I’m not sure I would choose a direct competitor for an even-handed analysis. (That said, I have heard only good things about the company.)

Charges

However, the analysis seems focused exclusively on charges, ignoring FX spread, which may be much more substantial that the fee. As I consumer, I’m less interested in how the margin is extracted, through fee or spread, and more in the final result, ie how many ‘dingalings’ I get net, per pound.

The piece felt lazy to me.

Finally, most irritating to me, is the failure to explore what all this means. Are the banks ruthlessly profiteering? Do consumers not accept that banks are businesses, motivated by profit? Are financial companies unfairly singled out on margins?

These are the questions that I believe would benefit from some scrutiny.

Margin

In conclusion, I am most interested in consumer perception of margin. I started in financial services behind the counter of a bureau de change in Paris. I was, and remain, fascinated as to why consumers would be outraged by a 10% commission on a financial transaction, and then happily pay ten times that margin on a coffee next door.

Why is that?

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