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PayPal customers have been paying a significant markup on currency conversion since the start of March, competitor TransferWise has alleged

  • Australian and New Zealanders shopping internationally may have been paying a big premium to do so since March, according to new analysis from TransferWise.

  • PayPal customers have been paying more than 1% on currency conversion since March, after the payment giant hiked its rates.

  • Its timing coincides with government restrictions coming into place and the online shopping boom that ensued.

  • Visit Business Insider Australia's homepage for more stories.


As shoppers turn to online shopping in record numbers, they may inadvertently have been paying a whole lot more than they realised.

Despite transactions increasing payments giant PayPal has been raising its foreign exchange (FX) rate, shortchanging customers buying internationally, according to data provided to Business Insider Australia by competitor TransferWise.

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Its 12-month analysis of the market shows how much Australians were charged over the last 12 months by major FX operators, including Australia's big banks.

"Banks and other providers like PayPal make money by adding a markup on top of the real exchange rate whenever consumers shop in another currency," TransferWise Australia manager Tim Cameron said. "They all charge a different marked up rate which is also not shown upfront or transparently making it impossible for shoppers to compare or know that they’re losing money when using their debit or credit card overseas."

Despite having a sordid reputation for exorbitant markups, the big four were surprisingly eclipsed by PayPal as COVID-19 restrictions came into force.

"A year-long comparison of the most popular international shopping currencies from Australia showed that at the height of the online shopping frenzy in March, exchange rate markups charged by PayPal across NZD, EUR, GBP, USD, SGD and CNY, rose to 5.6%. Meanwhile, rate markups charged by banks remained largely unchanged across the board," TransferWise noted in its analysis.

As the chart above shows, PayPal customers paid significantly more during this period than in the preceding 12 months, jumping just as government restrictions were implemented, containing consumers to their homes and shutting down brick and mortar stores. The movement does not reflect the rest of the market, with rates largely not moving, or even moving lower in the case of NAB.

Australians aren't alone though. Across the Tasman, a similar analysis shows Kiwis have also been stung by a similar rate hike, paying 5.55%.

The period coincides perfectly with a large uptick in online shopping, as Australia Post reports an 80% increase in parcels. Separate data from TransferWise suggests Australians and Kiwis are spending around 50% more online.

PayPal declined to comment directly on the analysis but told Business Insider Australia that the formula by which it determines its FX rate had not changed.

"Daily transaction exchange rates are reliant on the currency market, which has experienced significant fluctuations in recent months," a spokesperson said. "PayPal does not control these fluctuations, and nothing in its fee structure has changed in 2020 for Australia or New Zealand."

For consumers flummoxed at the thought they may be paying too much, Cameron suggests they check any FX rate quoted to them.

"There’s no reason why Australians should pay more simply for choosing to buy things from overseas," he said. "When shopping online from overseas retailers, consumers should start by looking at the exchange rate on Google, also known as the mid-market rate, to know exactly how much their purchase should cost in Australian dollars."