If you are a UK based business trading in Europe, with import payments or export sales in Euros occurring on a regular basis, converting the two currencies almost becomes a side business for you. An unfavourable exchange rate, commissions, and bank transfer fees are all additional expenses that when added onto your main business costs can easily reduce profits. 

There are several options available for foreign exchange transactions, but which one is best for your business when changing Pounds to Euros?

Three Main Types of Foreign Exchange Providers:

In the UK, foreign exchange services are handled by banks, high street outlets, and specialist foreign exchange brokers. Banks are where people are most accustomed to going whenever there is a need to convert Pounds to Euros or buyback Pounds with Euros. Besides, companies all have banking relations with banks and would just feel secure dealing with their banking partners. Individuals can get foreign exchange services at a bank too, but high street outlets' easier access certainly offers another alternative to going through a bank's sometimes complex procedures. Whilst banks and high street brands continue to exist, for serious business transactions, foreign exchange brokers have become much more accessible and offer a range of specialist services.

Addressing Businesses' Concerns on Foreign Exchange 

If cost and time are not major concerns, and specialist advice is not required, banks and high street brands can still offer reliable services which many choose simply due to familiarity. But if you are looking for speedier transactions and wishing to save more money, specialist brokers can provide a more personalised service. These companies are built on a different business model from that of banks and can pass on more savings to clients.

Traditional Bank Model

Banks trade currencies but they don't specialise in this area. The foreign exchange market is an ever changing place and sees rates fluctuating moment by moment. In providing an exchange rate, a bank doesn't always keep up with the market like true specialists can, bringing you the most up to date quotes. In many cases banks charge commission as well as fees for transferring money for you.

Specialist Broker Model

Specialist foreign exchange brokers can offer the best exchange rates and some even offer guarantees to support this claim. Online foreign exchange services can make profits without charging you commission because their negotiations with dealers is driven by the best and most current rates. These companies can offer better rates than banks as they deal in such large volumes they can demand the same rates as the banks, however they take a lesser cut and pass more of the savings onto clients.

Online Foreign Exchange Fees and Safety

These specialist online companies have also implemented safety measures to address customers' security concerns, such as using segregated accounts and lodged collateral. To be a foreign exchange broker, they must be fully registered with HM Revenue and Customs. Because of the online nature of their services, fees that traditional banks charge on sending or receiving deposits is eliminated. There is no transfer fee either.

Currency Hedging

Any business trading takes planning, so does a foreign exchange conversion. Planning ahead anticipates any potentially unfavourable foreign exchange rate changes and thus lock in current, acceptable rates to have a cost certainty. This can be done through currency hedging by using forward contracts.