Achieving the best foreign exchange (FX) rates often plays out like a well-constructed game of hide and seek. For businesses that trade overseas, hunting for the most optimal rates can be an arduous process – you need to manually search the FX landscape, negotiating with traders who historically don’t offer upfront, easy-to-view costs.
This distinct lack of transparent pricing, combined with the volatility of FX rates, makes it more challenging to purchase currency efficiently. This absence of clarity makes it impossible to accurately budget or plan for the true cost of FX, creating a knock-on effect that in turn directly impacts the bottom line.
You only need to look as far as other industries to observe the tangible consumer benefits that transparent costs can provide. With its upfront pricing and instant payments, Uber has revolutionised the way the world uses taxis, while the online estate agent Purplebricks has removed the hassle and “awkwardness” of price negotiations by introducing fixed house prices.
Despite a reluctance for the FX industry to follow suit (murky pricing will always benefit the broker, after all), there’s a glimmer of light at the end of the tunnel. We’re now finally starting to see transparent, predictable pricing models being introduced by industry innovators. For Jonathan Quin, CEO and Cofounder of the international Forex specialists WorldFirst, transparency represents a leap forward for an industry that notoriously favours the broker over the customer.
“Regardless of recent and significant advances in technology, the FX and payments industry has continued to operate under opaque pricing models. This creates a multitude of challenges for the customer that are today an unnecessary part of the FX experience. We are taking this bold step to lead long-needed change in this area”.
Transparent pricing is key to achieving the best FX deals
FX is one of the last remaining industries that doesn’t provide transparency as a standard. Without visible costs, it’s painfully challenging for businesses to compare and negotiate prices, which means you’re never sure you’re really getting the best deal. Businesses are also more likely to get caught out by hidden costs and fees, which means that rates that look great on paper don’t actually turn out so worthwhile on your business bank statement.
Access to upfront, transparent costs help to ease the pain of FX challenges like these:
Avoid the awkwardness of negotiation
Nobody likes to haggle. Negotiating with a broker can be time-consuming, frustrating, and prone to lead to conflict. After all, the fact that your broker is open to negotiation instantly infers that any broker worth their salt is going to make sure you really have to work to get the best price.
FX rates can change at the tip of a hat
The FX market is extremely turbulent. Rates can fluctuate incredibly quickly, to the extent that even the delay between calling a second supplier after negotiating a quote from the first could impact the rate available. This makes it near-impossible to accurately compare rates. Likewise, if you need to set up a trading account with a new supplier, be aware of the time this will take and the impact this could have on your original quote.
“No fees” doesn’t always equal “better deal”
Watch out for those pesky hidden fees! A lack of transparent pricing makes it easy to conceal additional costs. Here’s an example: it came to the attention of regulators that services were advertising themselves as having ‘no fees’ which gave the illusion that the price was lower than it really was. In reality, providers were earning their revenue by marking-up exchange rates.
Watch out for the difference between the FX rate and the FX cost
FX rate and FX cost is not the same thing. Your FX rate refers to the amount of currency you get, e.g. how many EUR per GBP. However, be aware that a great FX rate doesn’t ensure a great FX cost. Your FX cost is the difference, or spread, between the rate your broker gets it at wholesale value, and the rate it’s sold to you. The higher the spread, the greater the commission your broker is getting.
Don’t be enticed by overnight orders
Brokers sell overnight orders in an attempt to increase their profits or even to incur a holding charge. While overnight orders may look positive on paper, they can create risks if trading conditions were to change.
Transparent pricing marks a new era for foreign exchange
There’s little doubt that transparency is set to become the next big innovator for the FX marketplace.
For businesses and individuals who trade overseas and rely on the FX industry to pay and get paid, transparent pricing removes a lot of the challenges and frustrations that often mean that agreeing a rate is so difficult.
For the wider FX industry, transparency represents a lot more than just better costs – it also embodies the start of fairer pricing that finally favours the customer over the broker.
Whether you are marking an international money transfer for you or your business, WorldFirst will work with you to find the right solution for your needs. IoD members benefit from no fees and a best exchange rate guaranteed.
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