Tyranny Of Distance, Compliance And Cost Of International Payments Blocking Kiwi SMEs’ Expansion Ambitions

Auckland, New Zealand, 29 November 2024: A recent survey by Wise suggests that Kiwi SMEs need more support navigating the complexities of expanding their businesses overseas.

Nearly a third (30%) of NZ SMEs are already operating overseas, or have plans to do so. Those taking steps to expand internationally are held back by the cost of international payments (42%), regulatory compliance complexities (41%) and New Zealand’s geographical location relative to overseas markets (40%).

59% of NZ SMEs are currently using a traditional bank provider when it comes to their international payments - with over half (54%) citing they believe it's the most convenient option, and just under half (49%) believing it’s the most trustworthy option. Concerningly 17% are using a traditional bank because they believe it’s the most cost effective option.

Despite the majority of SMEs still being reliant on traditional banks, an almost universal view among business leaders - 91% - is that it should be illegal for banks to hide their exchange rate markups. Yet, hidden FX fees remain a common practice amongst New Zealand’s major banks, often leading to higher costs that are out of businesses’ control.

These higher costs are reflected in the cost of doing business. 41% of businesses agree that they have increased the price of what they sell; 23% agree that they’ve reduced the amount they can pay staff and 36% agree that they’ve reduced the amount they can invest in the business — all as a direct result of the high costs of international banking services in New Zealand.

SMEs spend big on fees - but aren’t clear on what for

The majority of Kiwi business leaders know they’re spending a lot on international payment fees, but out of those who have plans to expand globally, 52% of them don’t fully understand what they’re paying for. A further 8% are completely unaware of the fees.

A third (33%) of SMEs already operating overseas estimate spending up to $5,000 NZD a year on international payment fees alone, with 39% spending above $5,000. Interestingly, 28% of businesses believe they don’t spend anything or don’t know what they pay on international payment fees.

Tristan Dakin, NZ Country Manager at Wise says: “The lack of understanding around fees is a huge problem, and the amount being spent on FX fees reflects that, because Kiwis aren’t shopping around for a better deal.

Wise says that the source of confusion comes down to a lack of transparency by the banks, the majority of which aren’t transparent about the exchange rate mark-up on international transactions, and are not legally required to use the mid-market rate, or any specific rate, when exchanging or sending across different currencies.

“Traditional banks are charging Kiwis a fee of anywhere from 3-5% of the total transaction amount when sending money overseas. Those fees consist of a currency exchange transfer fee and an exchange rate mark-up, which isn’t made clear to the sender, and is reflected in this research.

Wise says in addition to decoding fee structures for international payments, more can be done to educate business owners on alternative (and cheaper options) available to them, recognising SMEs often don’t have the resources to do this themselves.

SMEs need more support to go global

There are a number of independent and government support agencies in New Zealand which provide resources and guidance to help SMEs catapult themselves onto the global stage.

Results from the survey revealed that more than half of SMEs considering expanding overseas would use independent or government support agencies for support and advice when deciding whether or not to expand overseas. However, those numbers drop exponentially for businesses who have already expanded, citing they relied on other SME leaders (30%) or no one at all (36%).

“Demystifying and helping SMEs to navigate the complexities of international expansion is crucial and based on our research, a necessary first step to helping more Kiwi businesses expand beyond New Zealand’s shores,” Dakin concluded.

Methodology:

A total of n=533 New Zealand business owners and key decision makers with fewer than 100 employees were surveyed from the Octopus Group online panel between 7-18 October, 2024.

About Wise

Wise is a global technology company, building the best way to move and manage the world's money.

With Wise Account and Wise Business, people and businesses can hold 40 currencies, move money between countries and spend money abroad. Large companies and banks use Wise technology too; an entirely new network for the world's money. One of the world’s fastest growing, profitable tech companies, Wise launched in 2011 and is listed on the London Stock Exchange under the ticker, WISE.

In fiscal year 2024, Wise supported around 12.8 million people and businesses, processing approximately £118.5 billion in cross-border transactions, and saving customers over £1.8 billion.

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