As a small business owner, knowing what to look for when choosing an online foreign exchange provider can be tricky, not to mention time consuming and likely scoring pretty low on your to-do list. However, taking an interest in your business’ foreign exchange (FX) requirements is important.
FX may be a by-product of your actual business, but if managed poorly it can put a dent in your bottom line. So what should you consider when choosing your online FX provider?
1. What FX rate are you getting?
Never be afraid to question your provider about the FX rates they quote you. Booking exchange rates online is a low cost business and this should be reflected in the exchange rates you receive.
All providers keep a “margin”. This is the difference between what they buy the currency, and where they sell it onto you. Ask what margin you’re receiving.
Most FX providers will charge a fee to transfer your money. Take the time to shop around though – as new players enter the FX provider marketplace, free transfers are becoming more commonplace.
It’s important to remember though, that a free transfer does not offset a bad exchange rate. Take the time to compare fees AND exchange rates.
3. Look for simplicity
Foreign exchange does not have to be complicated. Buying or selling foreign currency online should be a simple and fast process. A lot of websites have unnecessary bells and whistles to make them look good.
When researching an online provider, look for a site that allows you to complete your transaction quickly and easily with a minimum of fuss. A good site will make you feel as if you’re being guided through the payment process, with clear, simple steps.
4. How safe is your money?
Always check who is backing your transaction. It’s great to get a good rate and no fees, but you need to know that your provider can offer online security and full traceability on your money.
Passwords and security tokens can seem tedious, but they serve a purpose to protect you and your money against such activities as money laundering and terrorism financing. Always take into consideration how seriously your provider protects your security.
5. Customer support
Make sure you have a point of contact. If you have any problems with booking a rate or organising a transfer, you need to feel secure that you can contact a customer care representative via phone, email or fax.
6. Risk Management
Choose a provider that can help you protect your business against adverse foreign exchange movements. Actively managing your FX requirements could save your business money, especially during times of financial uncertainty.
Shopping around for an online FX provider can take time, but it’s worth it. At the end of the day the pay off can include more competitive FX rates, lower (or no) fees, greater security, better customer service, and a simpler way of doing your business foreign exchange payments.
John Zilic has over 20 years working in Financial Markets. For fifteen of those years he has worked within the Foreign Exchange division of a leading Australian Bank.