CurrencyFair Uncovers the Pitfalls of Foreign Exchange
Many people would think foreign exchange brokers or bureaux de change that advertise “commission free” transfers are providing a fantastic offer. In reality “commission free” means “hidden in the rate” but how many customers know this? Jonathan Potter, Finance Director of www.CurrencyFair.com, the world’s first person to person foreign exchange marketplace, explains the mark ups involved.
Specialist foreign exchange brokers have been a big hit with consumers who have moved overseas to work or study and small companies with currency exposure. However the lack of transparency and standardisation in fee structures makes it enormously difficult for consumers to find the best possible deal.
When banks trade with each other, the exchange rate is the “interbank rate”. This is effectively the wholesale price for currency and is not available to retail customers. Foreign exchange brokers add a mark up to this rate, much like a retail shop marks up the wholesale price of the goods it sells. In banking terms this is called the “spread”. However it can be difficult to get brokers to provide the exact spread at the time a rate is quoted. Currency calculators on broker’s websites typically show interbank rates and not true live rates and you’ll be hard pressed to find a fee list on any website showing the amount of spread applied to varying amounts. And brokers always price discriminate, they’re rarely interested in amounts less than £2500…
Some brokers build a transfer fee as well as commission into the rate, whilst others may add a transfer fee after the rate is agreed. Such practices make it unclear to retail customers as to whether the quote given is a fair mark up of the interbank rate at that point in time.
A growing number of customers are getting around the issue by negotiating rates of exchange with other customers using companies like CurrencyFair. Since launching in May 2010, CurrencyFair’s customers have saved over €1,000,000 when comparing their rates with typical Bank exchange rates.
Currency Fair’s Top Tips for finding the best deals this summer...
- Look for a disclaimer under any website currency calculators that states the rates are indicative only. This invariably means the rate is an interbank rate and nowhere near the rate that you’re actually going to get.
- Ask what the spread is.
- Ask what the interbank rate is.
- Find out if any transfer fees will be added on.
- And have your calculator handy!
ENDS
For interviews contact Brett Meyers on +353 (0)1 244 9585 or brettmeyers@currencyfair.com. Download high res photos and further information including fact sheets, user stories and pre-recorded interviews here: www.currencyfair.com/media-centre.
About CurrencyFair
CurrencyFair is the world's first peer-to-peer foreign exchange marketplace. CurrencyFair customers are able to exchange funds and transfer them overseas at a fraction of the cost of traditional banks or brokers, due to its unique and innovative p2p model. CurrencyFair was incorporated in April 2009, and went live online at the start of May 2010. Since then, thousands of customers have been served, saving them millions of Euros in bank fees and exchange rate charges.
Based in Dublin, Ireland, CurrencyFair is regulated by the Central Bank of Ireland under the European Communities Payment Services Regulations 2009. CurrencyFair Australia is regulated by ASIC, the Australian Securities and Investments Commission.
