Mon Aug 22 2022

Why do my FX markups get worse over time?

Integritas was the result of a small team of ex-currency brokers who were unhappy with the lack of transparency in an industry that has, in many ways, failed to innovate for the benefit of consumers - UK businesses trading overseas.

Major FinTech players (i.e. Wise, Revolut) are constantly bringing new products to market that make it easier, faster and cheaper for businesses to engage with suppliers and customers in other jurisdictions. It was clear, though, that a competitive alternative to old-school currency brokers did not yet exist for businesses who prefer a price-sensitive, automated approach to managing FX.

Traditional brokers continue to rely on a slow, over-the-phone approach that often comes hand in hand with a lack of transparency and unnecessary jargon about financial markets, the goal being to generate larger revenues from forward contracts - sometimes when not in the client's best interests.

It is common practice for businesses using an old-school currency broker to experience something called price divergence - the promise of excellent pricing that worsens over time.

This is because brokers can be more incentivised by commissions than by creating an efficient, transparent and consumer-friendly payment experience.

How to identify 'Price Divergence'

The best way to identify price divergence is to check for the real exchange rate at a given time and compare it to your rate.

Xe will tell you what the interbank exchange rate was at the time you booked a conversion, which is the true value of any currency pair. If you notice your exchange rates getting further away from the interbank exchange rate, it is likely you are experiencing price divergence, and the charges you incur for exchanging currency are becoming more expensive.

Alternatively, you can use our FREE COST CALCULATOR and track your charges with instant visibility of your payment overheads.

How to overcome 'Price Divergence'

There are some easy ways to overcome price divergence and save yourself a huge amount of time identifying it in the first place.

Service Level Agreement - an SLA is a binding document typically offered by banks that sets out the terms of service (i.e. to fix pricing at an agreed rate).

Transparent Alternatives - some platforms give users full visibility of the real exchange rate when booking a currency conversion.

Integritas offers its users both of the above, as well as rate alerts at actual market levels and fixed pricing at 0.15% with no fees. Take a look at our Platform Features.