Should FX transactions cost more for SMEs?
These customers need to purchase tens – often hundreds – of millions of pounds worth of foreign currency. Even at an extremely low rate the bank makes a substantial amount on each transaction.
SMEs have much smaller currency requirements than global conglomerates. Traditionally, for an SME wanting to buy only £10,000 worth of foreign currency, the options available have been extremely limited.
Between the uncompetitive spreads, commissions and hidden costs, the bank or broker could take anywhere between 2.5% to 5% of the transaction. £10,000 may be nothing to a large corporation or bank, but can be a significant amount to an SME, and steep rates can have a big impact on their bottom line.
Lack of alternative currency solutions has meant that SMEs have had their hands tied. Needless to say, this is not a democratic system. Big corporations are impervious whilst small businesses are unfairly penalised.
However, there are an increasing number of viable alternatives that mean SMEs can keep more money when exchanging currency. By using technology to facilitate the exchange, and eliminating the middlemen, the overall cost of the exchange is driven down – meaning SMEs no longer need to pay more for their FX transactions.
Use our free quote tool to see how much currency you could keep by becoming part of a P2P FX community.