Finance, International

What Do Companies Need From a Business Foreign Exchange Payment Provider?

Staff writer | 18 August 2021 | 3 years ago

It’s getting tougher to run a business without going international. Even if most customers are domestic, the cost savings of international suppliers/vendors gives a company an instant edge. And so, the internationalisation of business has exploded in recent decades. But, as it has, these firms have run into problems with international business foreign exchange.

In the beginning, many firms brokered international Forex transfers through financial institutions. But, as non-bank competitors popped up, some businesses found better deals through them. Yet, in 2021, many still use providers like Barclays and Virgin Money.

In this article, we’ll expose the disadvantages of using established financial firms for business foreign exchange. Then, we’ll talk about the top UK alternatives for foreign exchange clients. Let’s get started.

Sending Cash Through Established Financial Institutions is Expensive

The average business-person is exceptionally busy. Even with delegation, their plate is often full. So, it’s understandable that many are unaware how much money they’re losing via business FX. Upon examining the situation, the amount of lost capital can be truly shocking. Banks are the worst offenders, but some non-bank alternatives are just as guilty. Take Virgin Money, for example – on the first £25,000 GBP exchanged, they offer an exchange rate of 2.5% off interbank.

So, let’s say a UK real estate firm needs to make regular international business payments of £10,000 GBP to a Spanish account. At publication time, the GBP/EUR rate was 1.17985. So, when Virgin Money’s conversion cost is applied, 1.17985 becomes 1.15035.

At this rate, £10,000 GBP turns into €11,503 EUR once it lands in Spain. But, if the client could move money at the interbank rate, they would have €11,798 EUR instead. So, essentially, businesses moving £10,000 GBP to EUR are paying nearly €300 EUR for the privilege of using Virgin Money.

Of course, most Forex firms don’t move client funds at the interbank rate – the spread is how they earn revenue. And the ones that do (e.g., Wise) make their money by charging transaction fees. However, most money transfer providers offer rates/fees that beat the financial establishment handily.

Firms That Specialise in Foreign Exchange are Superior to the Banks

Most business foreign exchange firms are a better option than legacy providers. Starting in the 1970s, firms like Moneycorp saw a market need – outrageously high fees/exchange rates – and addressed it. Yet, despite being undercut for years, banks (and companies like Virgin Money) persist in charging expensive rates/fees.

To illustrate our point, let’s compare Virgin Money to Wise. Wise is one of the best-known non-bank foreign exchange providers, as they offer their customers the interbank rate. Rather than make money on FX margins, Wise assesses a transaction fee to generate revenue.

So, let’s revisit the example in the last section. In this case, our realty firm will use Wise to send £10,000 GBP to Spain instead of Virgin Money. Before moving this sum, Wise applies its transaction fee of £35.08 GBP, or about 0.35% of the send amount. Then, Wise converts £9,964.92 GBP at the GBP/EUR interbank rate of 1.17985. On the other end, the recipients get €11,757 EUR, or €254 EUR more than Virgin Money.

From a financial perspective, it makes sense to use a business foreign exchange firm for international business payments. As seasoned business people know, companies engaged in international commerce make business FX transfers repeatedly. So, the cost savings shown above can quickly add up to a substantial amount over months, quarters, and years.

The Best Forex Firms Do More Than Just Transfer Money

Superior exchange rates aren’t the only advantage FX firms hold over the banks. To win over businesses, these companies have gone all-in on customer service. This move was smart, as most Britons have been burned by financial institutions at one point or another.

Virgin Money’s Trustpilot page offers a prime example of this. An abysmal rating of 1.3/5 based on over 2,400 reviews shows how little Virgin cares for its clients. Barclays and Lloyds aren’t much better, with ratings of 1.5/5 and 1.7/5, respectively.

These dismal experiences presented a huge opportunity to fintech entrepreneurs. And, over the past decade, their startups have ran with it. Unlike the banks, they realised that different clients had different needs. Look no further than OFX, as they’ve established receiving accounts for Amazon/eBay sellers. Because of them, these clients can do fee-free transfers and access vastly superior FX rates.

Other innovations that business FX firms have conceived or elevated include forward contracts, dedicated dealers, and bespoke customer service. Once clients try these non-bank alternatives, they usually end up sticking with them.

Ten Foreign Exchange Companies Popular With UK Business Owners

Plenty of Briton entrepreneurs are frustrated with their financial institutions. But the problem these days isn’t the lack of alternatives – in the UK, there are dozens of viable options.

So, which firm is best? That depends on a company’s size, goals, and so on. In this section, we’ll briefly review ten business foreign exchange companies that work best for international business FX payments.

1. Moneycorp

Unlike most non-bank FX firms, Moneycorp was founded well before the internet. Back in 1979, they were pioneers, as they chose to offer better rates and service when nobody else was. For decades, they traded currencies on the High Street and in airports. But, by the mid-2000s, they began to leverage the internet. Fast forward to today, and this massive firm has offices on five continents, and they turn over an average of £36.9 million GBP annually.

With a broad suite of business services and overwhelmingly positive reviews (4.6/5 on Trustpilot, based on over 6,000 reviews), Moneycorp’s corporate foreign exchange is a solid choice for most businesses.

2. Afex

Moneycorp wasn’t the only pre-internet business FX firm operating in the 1970s. In the same year that Moneycorp was founded (1979), Afex started trading in California. However, there’s a reason you have heard of Moneycorp but not Afex – the latter has mostly served larger businesses/corporations.

However, this narrow focus has paid off for Afex, as they move over $15 billion USD of international business FX payments per annum. In recent times, they’ve offered SMEs not just transfers, but also settlement options and risk management solutions. Afex is less-known than its competitors, but with a Trustpilot score of 4.6/5 (over 600 reviews), they are well-loved by their dedicated users.

3. Global Reach Group

This business foreign exchange firm is another entity that’s not well-known. Formed in 2009 from a four-way merger, Global Reach has mostly marketed its services to finance industry clients.

Professionals in real estate, private equity, and debt management firms are well-acquainted with Global Reach Group, thanks to their business FX offerings that include options and window forwards. Annually, they move about £5.5 billion GBP, and boast a Trustpilot score of 4.3/5 (more than 600 reviews).

Global Reach does have one big disadvantage, though – they don’t do business with US banks. As a result, they are nonviable for companies that do business in America.

4. Currency Solutions

Many SME owners have never heard of Afex or Global Reach, despite their prowess. As explained earlier, both of these companies focus on corporate clients. However, Currency Solutions has gone out of their way to serve SMEs. Since 2003, they have offered their customers bespoke solutions to unique problems. With experienced dealers well-versed in current market conditions, Currency Solutions dispenses advice that has saved their customers billions of GBP. They can do this because they intentionally limit their client base – minimum transfers start at £1,000 GBP, and fees apply to transfers under £3,000 GBP.

However, like Global Reach, Currency Solutions does not serve American clients. Otherwise, they are an excellent option for small business owners, as their Trustpilot score of 4.9/5 attests.

5. OFX

With $20 billion USD in annual turnover and a 340 million USD market cap, OFX is a business foreign exchange giant. But unlike most firms in the FX niche, OFX was founded south of the equator in Sydney, Australia. In 1998, OFX started as a financial information website. But shortly after, founder/CEO Matthew Gilmour learned of the need for fair, value-priced FX transfers. More than 20 years later, they have offices in eight countries worldwide.

Like the other firms on this list, they offer bank-beating exchange rates. But as we mentioned earlier, they also offer specialised services for online sellers (like receiving accounts). And unlike many business FX firms, they are publicly traded, which makes them accountable to shareholders. Lastly, they serve the American market – a major plus.

OFX has a Trustpilot score of 4.3/5 (based on over 4,300 reviews). Given that this veteran firm has been in business for two decades, it further proves that they continue to serve businesses well.

6. Halo Financial

In many startups, the culture drives employees to think like entrepreneurs. But often, some leave to form their own company. That’s what happened in 2005, as several Moneycorp employees left and formed Halo Financial. Since that time, Halo has built up their business significantly. These days, they move approximately 500 million GBP in international business FX payments per annum by focusing on relationships over volume.

In addition to offering a standard range of services (spot transfers, forwards, etc.), they offer regular business analysis, investment guides, and white papers to their customers. Currently, Halo Financial has a Feefo score of 4.8/5 (based on over 150 reviews). This result is unsurprising given their people-first focus.  Halo also boasts an editorial score of 87.3% on MoneyTransferComparison.

7. Wise

Except for Western Union or perhaps Moneygram, Wise is one of the largest foreign exchange firms on Earth. Founded initially as Transferwise, this groundbreaking fintech firm re-branded earlier in 2021, changing its name to Wise. Initially, Wise made its name by charging the interbank rate. However, to generate revenue, they charge a nominal transaction fee. In the end, Wise is often the cheapest option for some currency pairings.

Apart from their relatively low fees/rates, they also offer multi-currency accounts. Because of this, online sellers and other entrepreneurs can avoid paying high rates on Amazon, eBay, PayPal, etc. But Wise might not be the best option for international business payments – they lack dedicated dealers, and their customer service team pales compared to boutique business FX firms.
Still, with a Trustpilot rating of 4.6/5 (on over 125,000 reviews), they are an excellent option for small business owners.

8. WorldFirst

WorldFirst is another big name in business foreign exchange. In 2004, they launched intending to make money transfer accessible to all. For more than a decade, they did this, offering foreign exchange services to businesses and individuals. But shortly after being acquired by China’s Ant Financial, WorldFirst made several changes.

First, they stopped doing business in the United States. And second, they got out of the private client business, opting to focus solely on corporate accounts. For business owners in the UK, little has changed. With FX margins as low as 0.15% (for transfers exceeding 5 million GBP), WorldFirst is one of the most cost-effective options available for making international business FX payments. But, this advantage is tempered by the reality that a Chinese concern owns WorldFirst.

However, they have a Trustpilot score of 4.6/5 (based on over 1,900 reviews), which reflects their commitment to customer service.

9. AirWallex

Founded in 2015, AirWallex is the youngest FX firm on this list. But what it lacks in seniority, it makes up for with its unique offerings. In addition to relatively cheap transfers and multi-currency accounts, clients can create virtual debit cards for employees. These digital cards make it easy to monitor employee expenses and to impose spending limits. As well, businesses can integrate their account transactions with Xero. This way, their books automatically update, saving hours of work.

Airwallex is a young company. But, already, they move $3 billion USD per annum for their clients. Combine that with a Trustpilot score of 4.2/5 (based on over 140 reviews), and you have a firm that’s worth watching.

10. Collinson & Co FX

Compared to the above firms, Collinson & Co FX is an unorthodox pick. Based in New Zealand, this company doesn’t strictly focus on business foreign exchange. In addition to that, they also offer wealth management services, M&A consulting, and curiously, a crowdfunding service for raising capital. But, make no mistake – their FX division is a major component of their business. Like the firms above, they offer rates that beat the banks. Additionally, risk hedging tools like forward contracts are also available.

Collinson & Co FX may not have the bells and whistles of bigger foreign exchange firms. But, if a firm has business interests in New Zealand AND has needs that align with Collinson’s other offerings, this FX company may be their best option.

 

British companies have long been acquainted with business foreign exchange. But, these days, they are more reliant on suppliers, vendors, and customers outside the UK than ever before.

With markets spanning all six populated continents, they cannot afford to leave money on the table. And with competitors accessing cheaper labour and raw materials abroad, they need to keep up or get left behind. And so, choosing a compatible foreign exchange partner is crucial. Staying with an expensive financial institution can cost a business untold thousands in lost capital annually. That’s capital they could reinvest in their operations.

To keep more of their money, these firms need to align themselves with a business foreign exchange service that saves them money and is also on their side. In a world where a global pandemic is stressing budgets, businesses need all the help they can get with international business payments.

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