Businesses trading internationally are
unnecessarily losing out on thousands of pounds, dollars & yen when making
and receiving international payments.
According to a recent article in the FT, a third of respondents to a survey
reported gains or foreign exchange losses exceeding $1m.
Today, we’ve invited Daniel Abrahams,
co-founder of My CurrencyTransfer, an OPP award winning foreign exchange
comparison website to help better understand how to score a fair and
transparent deal on currency.
Always
opting for bank rates
A large proportion of SME’s are unaware
that there are alternative methods of making international payments. Banks
apply hefty markups away from the real rate of exchange, and charge fixed fees
per transaction of up to £40 per payment. In the past couple years, we’ve seen
a raft of innovation in the international payment space. Using a reputable, FCA
regulated non-bank foreign exchange provider can help you save up to 5% on your
international payments. On a £100,000 transaction, that’s a saving of up to
£5000. Not to be sniffed at!
Honeymoon
Rates
SME’s making international money transfers
should be aware of a term known in the industry as ‘honeymoon rates.’ Less than
transparent currency brokers and banks will offer clients a great rate on day
one, only to widen and widen the ‘‘markup’’ away from the real exchange rate
over time. It’s important to benchmark every single transaction against the interbankexchange rate to avoid the pitfalls of poor spreads.
The difference between the ‘interbank rate’ and the ‘sell rate’ represents the
true cost of your currency conversion.
Not
managing currency risk
According to EuroTreasurer, one out of every three survey participants reported
having increased difficulty even finding a bank that would hedge exchange risks. However, working with a foreign exchange
broker lets you take advantage of a number of ways to manage a business’
foreign exchange risk. Often, you can trade ‘at the right rate, but the wrong
time.’ Through currency contracts such as: forward contracts, limit orders
& stop losses, an FD can help mitigate against the risk of adverse currency
fluctuations.
Each customer is allocated a dedicated
account manager who can take time to understand the business’ foreign exchange
exposure. It’s so important to have a tailored & proactive service that is
‘on your side.’
No
competitive pricing
It’s advisable to have a live trading
account with more than one FCA regulated non-bank foreign exchange provider.
Most don’t and this can often lead to becoming too comfortable with one
particular foreign exchange company (think honeymoon rates). On each and every
trade, cross compare the exchange rates offered between two reputable
suppliers. After all, more competitive quotes equal a better saving!
The
myth of 0% commission
Finally, never be duped into believing
that 0% commission means fee free international payments. It’s simply an
elaborate marketing gimmick which in no way, shape or form equates to zero cost
currency exchange. Whether you transact with a bank or foreign exchange broker,
a good or bad currency deal will always be guided by the competitiveness of the
exchange rate alone.
Good luck and with a little careful
planning, your business will be well on the way to scoring a fantastic deal on
international payments.
