The smart way for charities to save £50 million a year

By on April 20th, 2017 in Editorial, Press

The 2009 ‘Missing Millions’ report, commissioned by Stamp Out Poverty, reported that foreign exchange and international payments were costing charities £20-50 million every year. “Many millions do not make it to their intended destinations because charities often encounter uncompetitive rates and misleading transfer fees when purchasing local currency,” stated the 2011 follow-up guide, ‘Better FX’.

So, how is this happening, and what can you do about it?

Understand how your provider calculates costs

There are three ways in which you typically pay for an FX transaction, often a combination of the below:

  1. A percentage commission based on the amount of currency you exchange
  2. A flat fee for the provision of the service (rare on its own and often in combination with 1)
  3. The cost of the exchange is hidden in the ‘spread’ of the currency you buy/sell – this is the margin a provider applies on top of the institutional rate they acquire from their bank

When you see a tantalising ‘0%’ or ‘no fee’ promise, it’s likely that point 3 is in effect (with freemarket, when we say 0%, we really mean 0%).

Subscription charges and annually paid management fees, as well as charges that kick in when a service is not used, are other ways that you can lose money.

Know what you are being charged for your foreign transactions

Our 2015 report, ‘Breaking out of the FX status quo’, found that 0.8% is the average charge for a currency transaction. However, if you are working with a bank or broker, costs can range between 0.5% to 2% of each transaction. In other words, for every £1000 you receive in donations or grants, up to £20 could be thrown away unnecessarily.

When compared with the 0% that freemarket charges charities, whereby hundreds or thousands of pounds can be saved by avoiding unnecessary commissions, that’s equivalent to a significant donation, with little or no fundraising effort.

Compare offerings and learn about alternatives

If you think that your current provider’s deal is too good to be true, it probably is. Many providers hook customers by offering extremely competitive rates, but gradually hike these up without making you aware. Make sure to challenge your provider and compare overall rates.

Alternatively, you can switch to a cheaper provider. Over recent years, technology has spawned several new currency exchange models which come with a much lower price tag.

The ‘peer-to-peer’ (P2P) model enables individuals to transact directly with each other rather than using an intermediary. P2P currency exchange operates like a matchmaking service between people and organisations, enabling a currency swap. It still benefits from the safety and security of traditional banking services such as escrow accounts, but is simpler, faster and cheaper.

Automate your foreign transactions

We live in an age where it’s possible to automate just about anything – including feeding your cat and brewing a coffee before you’ve even left your bed – why not our foreign transactions?

Using technology to facilitate the exchange drives greater efficiency, whilst P2P aggregation enables us to achieve a better rate for all participants.

So, what are you going to do about it?

Reducing overheads is a responsibility for the charitable sector. The Charities Act stipulates that a charity must operate in the public benefit, and make sure the charity’s assets are only used to support or carry out its purposes.

You could sign up to freemarket’s platform and start transacting at 0% right now. You won’t regret it, and nor will the people and good causes you are doing so much to help.


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Alice is Head of Account Management at freemarket. Her friendly, customer-centric approach ensures that everyone who joins gets an efficient, added value service that’s right for them.


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