One of the first things to look out for when you make cross-border payments is the exchange rate, with many considerations. Does every international payments provider offer the same exchange rate? Is there a “best” time to get the most favourable FX rates for your business payment? This article will guide you to a better understanding of how to get the best FX rates for your business.
How are FX rates determined?
An exchange rate is the value that determines how much you can buy or sell one currency in relation to another. When you first search up the exchange rate on Google, you would see a mid-market rate which is the midpoint between buy and sell rates.
This is also known as the “true” FX rate. The rate incurred during interbank transactions is not the same as the actual FX rate. This rate difference is known as the spread or exchange rate markup.
Cross-border payment providers, be it banks, remittance or fintech platforms, are inclined to add a markup for their service. So, when you check out the exchange rates on their platforms, you would notice that there are different exchange rates because the platforms have already added the mark-ups.
Why do FX rates matter?
Do you realise that FX rates tend to be in percentage point? So, think of your transaction volume as well as its frequency. While the percentage point may look relatively small at the time, it will add up to a lot.
Rates tend to be the main deciding factor because when you opt for a good rate, you can end up lowering your cost by hundreds or even thousands cumulatively! (Take a look yourself at the table below)
In turn, bad rates could cause your costs to increase unnecessarily and thus reduce your profit margin.
How do you compare exchange rates?
Generally, FX providers would provide real-time foreign exchange rates on their websites or apps through a FX calculator.
While there is a mid-market rate, each FX provider may have a different rate due to their overall fee structure. So, comparing rates between platforms are important to ensure you find the most cost-effective FX solution for your business.
Where can you get the best exchange rates in Singapore?
With so many different FX providers in Singapore, how do you decide which one to go for?
As an example, we took a common use case that is the exchange rate from SGD to USD and compared it with exchange rates from DBS, OCBC and UOB. We placed the data from the FX calculators on the table below.
In this case, Wallex has the best exchange rate because the recipient receives the maximum amount of US Dollars.
Compared to the highest offer rate, you save close to US$1,500 for this particular transaction. Imagine if you send US$100,000 monthly, you would save approximately US$18,000! That is a substantial amount of savings that can be reinvested to other areas of your business.
Why do banks tend to charge more for international payments? The combination of intermediaries and bureaucracy factors into why their exchange rates are far more marked up. You can find out more about why Fintech is a secure, cost-effective alternative here. While you can find other FX calculators from fintech platforms such as Wise or Instarem, bear in mind that these platforms cater to smaller transaction volumes and payment limits for individuals.
When is the best time to send international payments?
Rates change every second, fluctuating many times within a day. So, it can be hard to decide when exactly would be the best time to send money abroad. That can make it cumbersome to find the most opportune time to make a payment, where you are always wondering whether you can get a better ‘bang for the buck’ for your international payment. Planning as early as you can always helps. Otherwise, when you feel a sudden sense of urgency, you may panic buy or sell currency at a worse rate.
What helps? Find a FX provider that can help you monitor currency exchange rates and offer the most preferred FX rates based on your business needs.
For example, as a Wallex customer, you can communicate freely with your Account Manager. Every Wallex customer gets an Account Manager, regardless of business size and volume. Through your Account Manager, you can share your business needs and we will determine the most favourable rates for you. Consider items such as:
1. What are the currency pairs you need?
2. What is the purchase price?
3. What is your desired profit margin?
4. When do you need to make your business payment?
Using Wallex To Get The Best FX Rate For Your Business
At Wallex, we do our best to provide you with the best exchange rate possible through a customised package for your business. We provide cost-effective and secure international payments while providing better-than-bank exchange rates. Wallex customers also get access to exclusive FX market insights that can help you monitor the foreign currency trends and help you gain FX cost advantage .
Unlike leading banks, be it DBS, UOB or OCBC, our rates are personalised to the unique needs of your business. As an Asian Corridor Specialist, we particularly specialise in serving your Asian currency needs cheaply and quickly. So if you are looking at the fastest way to send money to Indonesia or the cheapest way to send money to Hong Kong or any other Asian currency, look no further.
Beyond converting currencies, you can also hold currencies then send payments through our Wallex Business Account. If you are looking to receive money, you will be given a virtual account as if you have a local currency bank account. Through our multi-currency wallet, you can manage your currencies and hold them in your wallet until you find a favourable timing and rate to convert. You can even lock in the best mid-market rates for up to 24 hours, that is funding the transaction within the 24 hours since you set it up.
There is no limit to the amount of transactions you can do with Wallex. Moreover, creation and maintenance of a Wallex Account is absolutely free.
Tips for success to navigate the ever changing economic landscape