How to make sure you partner with the right FX provider

In today’s global market place, many British companies – both big and small – are finding themselves overly exposed to currency volatility. Are you one of them?

Does your FX provider help you make well-informed business decisions? Do you rely on banks and other foreign exchange (FX) brokers to look after your risk exposure? How do you know whether you’re getting the best possible service for your business? Do you even understand what the true costs of your international payments are?

SMEs are often mis-sold complex products that are priced and suited for large corporates, so it pays to team up with a trusted FX partner who has the knowledge and expertise to create a bespoke solution that truly meets your requirements.

A good FX provider will take the time to understand your business, identify your exposure and then help you to develop a robust risk management strategy. They’ll help you to select the right tools and products to minimise or eliminate foreign exchange risk for your specific circumstances. Importantly, they’ll explain what kind of currency hedging products, such as forward contracts for example, are available to you – pointing out which are best for your business, not best for them.

Partnering with the right FX provider can add real value to your business. It will protect your bottom line, and your profit margins too. By making your business’s FX a fixed operational cost, you can drive your business forward, safe in the knowledge that your business strategy – not the market – dictates your success.

Step 1: Start to ask some serious questions…

The very first step is to ask questions of your FX provider to ascertain whether they’re really helping your business and what the real cost of any transaction is.

These questions should include:

  • Are they knowledgeable?
  • Do you have a personally assigned, experienced Account Manager or do you have to deal with call centres, speaking to different people every time?
  • How fast are the payments made? Are same- and next-day international payments available or do they take or longer?
  • Are they transparent in their pricing and processes?
  • Are they regulated by the FCA and HMRC in the UK?
  • What additional value can they provide to your business – education, continued support, access to other international trade expertise?

Once you’ve determined the answers to these general questions, you can start to dig into greater detail…

Step 2: Review your FX costs

Don’t be shy of putting your current provider on the spot and asking them the finer details about your international payments. Here are 4 key questions to ask:

  • Q1: What is the spread on the interbank rate?
    The spread is the additional charge added by the bank or broker to the interbank rate. If your provider is truly transparent, they’ll disclose this information to you. If not, it sends a strong signal that they may be charging a further fee in the form of an undisclosed spread.
  • Q2: Is there an additional cost for the delivery of funds? There can often be an additional fee levied on your business for sending the funds from your bank account to the beneficiary’s. Make sure that you are aware of and are comfortable with any fees charged on top of the spread for each transaction.
  • Q3: Does the spread percentage change on the same currency pair over time? A common tactic that unfortunately is very common in the foreign exchange industry is this: in order to attract your business as a client, many banks and brokers initially offer competitive exchange rates, with an unusually small spread. With time and more transactions, the spread is widened, with no disclosure. This brings us back to Q1 – always asking what the spread percentage is will stand your business in good stead.
  • Q4: Are there any other costs involved?
    The traditional finance sector is known for applying hidden fees. Ask if there are any, and why. Does it sound like a ploy to get more money from your business? If so, it’s a sure sign to look elsewhere…

Where next?

Explore our different approach to foreign exchange by speaking to one of our account managers – call 0203 326 9082 or email