Your Bank Might Be Charging You More for FX Than You Think

Here’s something any FD or CFO who makes regular international payments should do. Find out exactly what you’re paying for FX.

Not the £10 payment fee. The actual margin inside your exchange rate. Because there’s a big difference.

Orbis has spoken to plenty of businesses over the years who think they’re getting a good FX deal because they’re paying very little in visible fees. Then we look at the exchange rate. That’s where the cost is.

A 1% difference doesn’t sound like much

Let’s say you’re exchanging £100,000. 1% is £1,000. Maybe that doesn’t sound business-changing.

But if you’re exchanging £2m over a year? That’s £20,000.

2%? £40,000.

3%? £60,000.

Suddenly it’s worth looking at. And that’s money that can disappear without ever appearing on an invoice marked:

“FX charge: £60,000.”

It’s simply built into the exchange rate.

But there’s another mistake businesses make

They become obsessed with shaving a tiny amount off the transaction margin while ignoring the bigger risk.

Let’s say you save 0.5% on the cost of buying €500,000. Great. But then you leave another €1m completely exposed and sterling falls 5%.

The wrong battle has been won.

This is why FX shouldn’t purely be a conversation about:

“What’s your rate?”

There are really two questions:

Are you getting competitive pricing?

And:

Are you managing your currency exposure properly?

You need to look at both.

Here’s what to ask your current provider

Ask them:

• What’s the live interbank rate?

• What’s the rate you’re giving me?

• What’s your margin?

• How much did you make from our account last year?

A good provider shouldn’t be uncomfortable answering those questions.

Transparency in FX needs to improve. Businesses should know what they’re paying. And if you’re putting £1m+ through the market every year, it’s absolutely worth finding out.

Orbis can benchmark an existing FX setup pretty quickly. Sometimes everything looks good. Sometimes thousands of pounds in unnecessary cost are identified.

Either way, at least you know.