You could be shelling out more money than necessary in your foreign exchange and payments process. Because these hidden costs can impact capital that could otherwise go towards innovation, automation and talent, uncovering them is critical to your organization’s operational efficiency. Where is that money going?
Firstly, banks don’t often reveal the exchange rate. You’re losing money on conversions simply because the exchange rate isn’t transparent, and you’re unable to assess other rates to make more informed decisions.
Banks may also markup the exchange rate for certain customers and pass the wholesale exchange rates to only their largest accounts, allowing those preferred customers to save disproportionally while others bear the cost. Additionally, payments providers often charge a markup on top of the true exchange fee, in which case a percentage of the entire conversion is siphoned from your business. The spread can be complicated to untangle.
Furthermore, there’s always the opportunity to make transfers and exchanges via credit card. However, these organizations, too, will need to make an conversion, in some cases adding friction — and therefore, hidden costs.
Even if you believe the exchange rate you’re receiving is fair, you might be victim to the “honeymoon” scheme, wherein you’re courted by a provider at a lower rate for a period of time. As your relationship with the provider matures, and you become more comfortable, you may cease to constantly compare your rates with the market and your new provider may become just as expensive as the last.
The only solution is to find a provider that offers wholesale, transparent rates — in essence, passing on to you the same rates they receive for conversion. In the deeply opaque FX market, true provider honesty is key to dealing with previously hidden costs.
The bottom line is that without the economic buying power to control exchanges and encourage a bank to pass through volume-based discounts, or the visibility to understand the hidden costs of FX, hidden fees can undermine your efforts toward efficiency. A third-party payments provider can act as an aggregator and pass the savings to you, so you can either pass them to your customers or put them back into your business. Either way, your decisions are enabled by the working capital recouped from the FX process, and your confidence is enabled by transparency — a unique proposition in the FX space.
