Foreign exchange Beating the banks

Foreign exchange: Beating the banks at their own game

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In the last decade or so, a specialist banking industry has grown up, aimed at businesses and the public, but of which most people are still unaware.

The firms specialise in changing your money into foreign currency, but at far better rates than those on offer from high street banks and bureaux de change.

On bigger sums, such as moving hundreds of thousands of pounds abroad to buy a property, they offer savings running into thousands of pounds.

Some of the firms are happy to deal with you even if you want to move just a few hundred pounds abroad.

“We can give customers a much better rate than the banks can do,” says Rupert Lee-Browne of Caxton FX, one of the larger firms in the business.

“We have a currency card; we have an online system for £100 to £25,000 at your convenience and that money comes off your debit card; and then for anything more than £5,000 we recommend you speak to our account managers,” he explains.

Bank to bank

There are about 100 foreign exchange (FX) companies in the UK which specialise in moving money from your bank account here to another one abroad.

Typically they do not deal in holiday cash, just bank-to-bank transmissions.

They are rather different from the hundreds of High Street money transmission businesses which cater for members of the many immigrant communities in the UK who want to send money home.

Instead, the big FX firms get their business from small and medium-sized companies with bills to pay or transactions to finance in foreign currencies.

And they service wealthier individuals, such as people buying a property abroad, or people who have regular sums of money to move, such as pensioners living abroad but receiving their pension money in the UK

Undercutting the banks

Foreign exchange firms such as these work by buying currency in bulk at money-market rates from banks – the rates at which they trade with each other.

They then sell it at a rate that is advantageous to their customers, but with sufficiently low overheads, they can still make a good profit on the deal as well.

The point here is that the banks will charge you a 7% profit margin if you simply wander into a local branch and ask for some foreign currency, so there is plenty of scope for others to take a slice of the pie.

“It is almost an ordeal for private customers to go to their bank branch and change money,” says Dr Tien Tran, chairman of Currency Solutions, based in Bermondsey in South London.

“If it is a small amount, they will give you the bureau de change rate, which is about 6-7% off the market rate, and you will have to change at least £25,000 before they will let you get a rate from their treasury department.

“And they will only give you a rate if you want to deal there and then they won’t even quote to you if you say you want a rate for a month’s time.


The recent collapse of Crown Currency Exchange, based in Cornwall, sent a shudder through the industry.

That firm dealt mainly in holiday cash and because it was a small firm, with a turnover of less than 3m euros a month, the payment services regulations required it only to be registered with the Financial Services Authority (FSA).

Rather alarmingly, the FSA’s chief executive, Hector Sants, recently told MPs that this procedure was just an exercise in form-filling and was more or less worthless as a form of consumer protection.

Firms with business above that level, however, are subject to much more scrutiny and have to be authorised by the FSA instead, not merely registered.

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