Choosing a foreign exchange provider for your business

To ensure finance best practices, for your company you should carefully consider their FX management strategy, including with whom to conduct foreign exchange transactions between banks, FX broker services and foreign exchange providers from the fintech sector.In this blog post we share what we see as 5 crucial factors in choosing a foreign exchange provider for your business.

1. Price comparisonComparing FX services is crucial. Do not take “0%” commission claims at face value.Find out the exact charges applied to FX transactions. This can include a transaction fee, spread in the exchange rate and a delivery fee. Some providers even add administrative fees, so caution is advised and getting fully informed before committing. Also, many businesses have been duped by the common prqactice of “dumping” – where unbeatable initial rates are offered in order to snare the customer, before loading charges into subsequent trades. This requires a stonewall attitude when it comes to questioning the potential FX provider. Ask, ask and ask again to ensure all doubts are clarified.Many FX providers are unfair, charging their clients huge spread, when using stop-loss or automatic orders. In that case, they usually widen their spread given that the client is unable to track the order and check the timing and spread applied.2. Clarification of your business FX needsIf you only need a simple enough service, such as spot trades or forwards, regular care is advised not to get sold complex financial products that are not needed. Many businesses buy financial products that they either do not need, or use sparingly at best, unnecessarily increasing costs. Banks are adept at selling these products, promoting unique features to the client, which may be impressive, but for many customers, they are unnecesary. One example is the accumulator, a type of financial derivative, where if a strike price is met, both the buyer and seller are obliged to complete the trade, having previously reached a binding agreement. Banks and other FX service providers are known for promoting their more complex financial products more, as they are simply much more profitable for them.3. Ease of use of trading portalIs the platform understandable and efficient? Will you have any issues with understanding exactly how much you are being charged? Do you have access to mid-market rates (that update in real time) to know exactly what spread you are charged? These are the questions that will be important once you start trading, as your business’s time and money is in play.4. Regulatory complianceReputable service providers are authorised and regulated. In the UK, for instance, look for Financial Conduct Authority (FCA, formerly the FSA) regulation. Other countries have regulatory or supervisory bodies. Clarifying regulation procedures and requesting proof if in doubt is pivotal, no matter how professional a provider’s website looks.5. Customer service and treatment of current clientsBeing able to contact your FX account manager or another representative from your FX company will be an important factor in your considerations. Do they accommodate your requests in full and promptly? Is there a proper complaints system in place? Do they focus on their current clients as much as they do in winning new clients? These are just some of the questions that should be considered.Following these 5 best practices will ensure you are on the right path in choosing an FX provider for your business. As a final word, we would also like to underline the importance of not cutting corners and ensuring you set aside the required time and resources as it will stand you in good stead in the future.Did you find this blog post helpful for choosing a foreign exchange provider for your business? If so, you can download our free FX 101 guide at the link below to learn more about the fundamentals of foreign exchange and access more expert industry advice: