Despite the unfolding of Brexit, Poland and Britain will undoubtedly continue to share a close economic relationship. The UK remains to be a significant importer of Polish goods, amounting to £13.4 billion in 2020. Poland tends to import British cars and manufactured goods, whilst the UK sees Poland as a key seller of electrical machinery and meat.
Of course, there’s the remittance market too, with the UK being a lucrative place for many Poles to work, save, and send money back home. Poland receives the sixth most amount of remittance sent out of the UK, amounting to just over a billion GBP. With early settlement status easy to achieve in the UK for Poles, this will continue to be the case despite a decoupling from the EU.
However, of that billion sent over each year from the UK to Poland, there are millions lost in international currency transfers. The Pound is an expensive currency, but UK and Polish banks are failing to complete low-cost transactions. Customers often experience currency margins of around 3% – in some cases more – and also flat fees. It can be comfortably estimated that over £30 million each year is wasted in fees and margins.
Competition elsewhere
Banks are certainly not the only place remittance can be sent from, despite being the traditional method. It’s often seen as a convenience to customers because they already have an account – and they know it’s safe.
However, money transfer companies (MTC) are specialists in remittance and aim to blow banks out of the water when it comes to fees, margins, and speed. Many money transfer companies aim to execute currency transfers for under 1% margin spread, and often have no fees at all.
Of course, they’re safe too, seeing that many mainstream MTCs are regulated by various regulatory bodies, such as the FCA. Generally, these funds are well protected, but not every company uses two-factor authentication.
Whilst the trading margins and fees depend heavily on which company, and often the amount sent, customers are beginning to realise that they’re reliably cheaper than traditional banking methods. In many cases, fees are slashed by up to 90% when using a money transfer company.
FX specialists can achieve lower rates by not only having access to the interbank rate but by being far more innovative and flexible. Instead of operating within outdated legacy systems using rigid infrastructure, they’re often adapting to each scenario, selecting the most efficient transfer method on a case-by-case basis, as well as having great expertise. Sometimes it’s not just the price that saves the customer money, but the dedicated dealer and advice are given.
Furthermore, banks are failing to offer hedging products for everyday people. Polish workers in Britain, for example, can make great use of locking in fixed exchange rates with Forward contracts. However, banks fail to offer this service, whilst money transfer companies facilitate this along with their expert support and advice.
Is Wise the automatic choice?
Wise (formerly known as Transferwise) is very often the default choice for those residing in the EU. This is because many EU currency routes have a guaranteed price for Wise transfers (often 0.5%), bringing a level of certainty to transactions. Instead of having to compare the converted amount on a quote to a quote on Google, and figure out the margin lost, customers can often guarantee it will be 0.5% – and if it isn’t, Wise clearly breaks down the costs for each transfer prior to executing it.
However, Wise has become a default choice when it’s not necessarily the best. Whilst it can be great for expats and holidaymakers, it isn’t ideal for sending large amounts.
With an incredibly easy-to-use borderless debit card, multi-wallet account system, and nice interface, Wise has become the expert current account for expats and small businesses. However, it lacks depth when users require more sophisticated transfers. Wise doesn’t offer a dedicated dealer, lacks phone support, and offers no hedging products.
Furthermore, very large transfers remain to have the same margin. This consistency was an advantage when transfer values were small, but it means customers do not benefit from beneficial rates when sending large amounts.
Many Brits and Polish alike will be using their savings to purchase property overseas. Sending such a large amount could benefit from a highly competitive rate with other companies that specialise in large transfers, such as Currencies Direct, OFX and TorFX.
Companies such as Currencies Direct are also specialists in overseas property. It’s not just the funds that need exchanging, but expertise on timing, legal matters, and potential complications surrounding an overseas investment. Wise can offer none of this, making it redundant for large and/or sophisticated transfers.
For example, an FX specialist may advise you to lock in a hedge, so you’re not exposed to currency risk during the waiting period of signing the contracts. However, knowing that contracts for properties often fall through – particularly in the UK due to the system being highly prone to purchases falling through – then an Option may be preferred over a Forward. This is to prevent a situation in which a Forward contract is locked in and the money must be exchanged, even if the deal falls through.
In both the UK and Poland, there are various fees to pay during a property purchase, such as agent fees, surveyors, and tax. Again, these are all costs that some FX specialists are well-versed in, and can offer great phone support.
Real Estate in Poland
Poland has seen a large growth rate in its property market over the past four years. Annual price growth was around 10% per year, and whilst the pandemic brought this down to near zero, prices are expected to continue rising. House prices in Gdańsk, for example, are up 46.7% since 2008. In Wrocław and Łódź, prices are up over 30% since 2008.
Some of this demand is influenced by expats and Polish workers who return to Poland after working overseas. However, this doesn’t tell the whole story, because business has been booming in major cities in Poland. Since 2016, the GDP per Capita in US $ has grown from $12,447 to $15,693 in 2019 – a staggeringly quick growth rate.
The 2008 subprime crisis hit Poland particularly hard because a lot of the mortgages were dominated in foreign currencies and the Złoty bottomed out, making the repayments extremely expensive. House prices continuously fell after the recession, and only in 2013 did they start to pick back up.
This quick growth is thus met with some apprehension around the stability of the property market this time around. However, with the increased banking regulations surrounding mortgages and the strong economy of Poland, the risk of such a large collapse appears smaller. What also appears stronger is the GBP to the Złoty, meaning those overseas purchases from the UK are increasingly cheaper since 2018.
Final Word
Banks can often play an important role in UK-Polish economic activity, however, this role is being increasingly reduced. Whilst mortgage brokers often want bank statement evidence, as do other lenders, it seems that money transfer companies are being increasingly used for remittance, savings, and current accounts.
Despite Britain leaving the common market, the feeling of the frictionless flow of capital remains with the benefit of such specialists – as well as the close relationship between the two countries. With super fast transfers, no fees, and a settlement status that is easy to obtain, the situation for many Brits and Poles feels relatively unchanged since the decoupling.