Currency conversion markup

Background

Banks charge consumers a markup when they have to convert money from one currency to another to complete a transaction on the consumer’s behalf. This is known as the currency conversion markup,^{Footnote 1}  and represents the difference between the “true” exchange rate—the midpoint between wholesale buy-and-sell rates in foreign exchange markets (also called the mid-market exchange rate)—and the rate applied to the consumer’s transaction.

Non-bank service providers offer products that compete with some foreign currency services provided by banks. These include cross-border payments, debit or prepaid card spending in foreign currency, and multicurrency accounts. However, they typically specialize in specific segments of the market and do not offer the same suite of financial services as banks do.

Fee structure

Banks disclose the exchange rate that they apply when converting currencies, but do not disclose the markups as standalone costs. Markups can be estimated based on the exchange rates applied to specific transactions. Available data indicate that currency conversion markups typically range from approximately 1% to 4% relative to the mid-market exchange rate. The markup varies by bank, currencies being exchanged, and market conditions.

Some alternative financial services providers, including fintechs, may apply lower or no currency conversion markups.

Disclosure

Exchange rate information is typically provided to consumers at the time of the currency conversion, in the form of a single all-in rate applied to the transaction. This rate reflects both the underlying market exchange rate and the currency conversion markup.

Key findings and implications

Key finding 12: Currency conversion markups may not be fully transparent to consumers, limiting their ability to make informed decisions

The cost of currency conversion services is embedded within an all‑inclusive exchange rate applied to a consumer’s transaction, with no transparency on the specific markup component.

The fact that a currency conversion markup is applied is typically described in account agreements in general terms, such as: “You acknowledge that the exchange rate used may result in revenue being earned by us on the conversion.” These practices do not enable consumers to quantify the markup that is applied.

In some cases, banks present a related service that requires currency conversion (e.g., international transfers) as free, although they apply the markup to the currency conversion itself.

The inclusion of currency conversion markups in an all-in exchange rate results in low transparency. This limits consumers’ ability to fully assess the cost of foreign currency conversions when choosing a service provider.

This lack of transparency has been identified as a concern in other jurisdictions. European policymakers have noted that non-transparent foreign exchange pricing can limit consumers’ ability to understand the true cost of payments and may weaken price competition between foreign exchange services providers.

In response, the European Union implemented measures that require payment providers to disclose foreign exchange markups clearly, in advance, and as part of the total transaction cost, treating them as explicit currency conversion charges that must be disclosed separately (see Annex 4: Overview of the European Commission’s Directive 2014/92/EU: Annual Statement of Fees).

In Canada, Budget 2025 announced the government’s intention to explore improving the transparency of cross-border transfer fees, including foreign exchange costs.

Key finding 13: The choice of foreign exchange services provider can materially influence the total cost of currency conversions

Currency conversion markups can substantially increase the total cost of international transfers, particularly for Canadians who send money abroad regularly. For example, a consumer who sends $1,000 USD per month from an account in Canadian dollars to a family member abroad through a bank service could pay about $475 CAD above the mid-market exchange rate over the course of a year.

In contrast, using a lower cost provider that follows, or closely tracks, the mid-market exchange rate could reduce the annual cost to about $115 CAD, for a difference of about $360 CAD per year.