UK banks cut FX transfer costs by 22 percent in Q1 -study

By Patrick Graham

LONDON, March 23 (Reuters) - British banks have cut theamount they charge for small international transfers betweencurrencies by more than a fifth in the past three months ascompetition in the sector continues to grow, an index of marketcosts showed on Wednesday.

Money transfer comparison and intelligence firmFXCompared.com said its quarterly International Money TransferIndex (IMTI) showed banks were starting to respond moreaggressively to the arrival of small online providers.

Banks cut the average cost of a transfer of 1,000 pounds ($1,410) by just under 22 percent between December and March,the firm said.

Charges fell to 4.8 percent of the value of each transactioncompared to 6.1 percent in December, still three times more thanthe 1.6 percent charged by non-bank providers.

Foreign currency transfers has long been an easy cash-cowfor banks, with major global lenders charging up to 8 or 9percent of the value of smaller-scale transactions to send moneyabroad and exchange it into the appropriate local currency.

Small web-based providers such as Transferwise, World Firstand Azimo have begun to eat into that business.

"It is likely the reason we have seen such a sharp drop inthe amounts banks are charging is down to competition fromcurrency brokers," said FXCompared managing director DanielWebber said.

"But there is still a very big difference between what youpay to a bank for moving money overseas compared to what youwould pay a broker."

The index measures the cost - including fees and the spreadto the central market rate at which banks trade currencies witheach other - for a range of transaction values and currencies.Those are gathered from dozens of Canadian, U.S., Australian andUK banks and brokers.

Australian banks remain by far the most expensive, charging6.8 percent to transfer the equivalent of 1,000 British pounds,down from 7.0 percent in December. In the United States, thosecosts rose to 6.1 percent from 5.6 percent in December.

For full details of the study, see: https://www.fxcompared.com/intelligence/international-money-transfer-index-imti

($1 = 0.7080 pounds)

(editing by John Stonestreet)