5 reasons why foreign exchange is not a priority for banks

With the world of commerce getting smaller more businesses are entering the global markets to utilise counties’ comparative advantage. The foreign exchange market is still the largest traded market place with over $5 trillion made in trades every day!

With a market so BIG surely the banks should be leading the way in supporting their business customers to navigate the foreign exchange market. This isn’t the case!

Antiquated systems

Banks are lagging behind in their fintech solutions for foreign exchange. The most dedicated foreign exchange providers have the ability to trade foreign currencies 24/7. Banks will close their dealing desks and service at the close of their business day. There are also some banks that still require you to visit in branch to make

Expensive

A lot of businesses think that they will receive the best rates from their banks. Sadly this is not true. Unless you are a sizeable business with access to their treasury service you are not going to get their best rates.

Recently HSBC offered a customer

• an exchange rate of $1.20 to the Pound

• when the intra-bank rate at the time time of quotation was $1.237

• to buy $500,000.

HSBC would have made £11,644 profit on that one trade!

They would also charge an additional £15 to process the transaction for their customer.

Reactive rather than proactive

Banks foreign exchange rate will be set daily with no ability for their exchange desks will simply take the orders as they come. There will no be ability to negotiate.

No single point of contact

With banks having thousands of employees you are not going to have a single point of contact who will know your business or understand your requirements and needs.

What’s the alternative?

An analogy that resonates well for the foreign exchange market:

If you want to buy 1 t-shirt you would buy this from a shop. If you want to buy 1,000,000 t-shirts you would buy through the wholesalers.

This is the case for foreign exchange. For one-off payments using the bank is a sensible and easy solution however if your business is making multiple payments every month or your business is purchasing £100,000+ in foreign currency, going to the expert wholesalers is going to be the best and most cost-effective solution.

At PathFinder FX we are offering a free 45-minute consultation and report on your foreign exchange exposure. In this consultation, we will review;

• A full audit and review of your foreign exchange services,

• Understand your requirements for foreign exchange

• Evaluate your risk management strategies for foreign exchange

• Identify opportunities to help manage and reduce the risk associated with foreign exchange

• Review of your current provider’s exchange rates

• Identify possible savings

• Provide actions to improve their foreign exchange payment processes

If you would like to see whether PathFinder FX could save you time, your business money and improve your efficiency when exchanging your currency, book your free consultation here