The UK sends an estimated $20 billion abroad annually in foreign exchange payments. That all adds up to a very lucrative market that was once upon a time, left to the banks to serve pretty much unopposed. However, that has now changed and the UK’s financial services sector now features several money transfer and foreign exchange specialists who can help facilitate both b2b and b2c fx payments and help clients get their money wherever it needs to go in the world.

In this post we will take a closer look at the foreign currency (FX) payment specialists and how they can particularly help small-medium businesses and high-net worth individuals save serious money when making a payment abroad. We will focus on both straightforward money transfer providers, as well as companies who provide money transfers, as well as other foreign exchange services.

Making an Making a Payment Abroad Using The Banks

Whenever a business or private customer needs to make an international payment, the default option is usually to use their bank to handle it via the SWIFT payment network. This is afterall, relatively easy as it simply means calling the bank and making it happen. However, the reality is that the banks are not competitive when it comes to international payments and use the transaction as an opportunity to make some easy profit by charging their customers some pretty high flat transfer fees, and then using foreign currency exchange rates that are significantly below the open market rate.

Note that when an account holder is receiving payments from abroad, they are still charged a transaction fee by their bank

In the case of high net worth individuals or SME’s who need to send large sums of money, the fees and mark-up costs can be very substantial. In the case of a business running on tight margins, the costs can seriously undermine profitability.

FX Payment Specialists

On the other hand, Foreign Currency Payment Specialists can offer their customers a lot more. Firstly, many straight-forward money transfer providers operate low or even zero-fee business models. To give this some context, whereas Lloyds charges international payment fees of £17, Wise’s fee-scale starts at £0.

Next, both money transfer specialists and foreign currency specialists usually offer much better exchange rates than the banks. Whereas banks tend to apply a foreign exchange mark-up of between 2-3%, the foriegn exchange specialist mark-ups begin at closer to 0.25%.

Other advantages of working with a foreign exchange specialist is that they can offer “hedging” options such as forward contracts (agreeing to buy a foreign currency at a favourable, locked in rate) as well as a bespoke service.

It’s little wonder that the bank’s monopoly of foreign exchange services is fast eroding.

The Biggest Names in Business Foreign Exchange Payment

As we stated in the introduction, the UK’s foreign exchange market is rather buoyant and there are plenty of providers competing for both business and private customers. Let’s take a look at some of them.

• Wise – Founded in London in 2011 as Transferwise, Wise offers fast, low cost international payments as well as multi-currency accounts. Wise has proven very popular with freelancers and digital nomads and are an excellent choice for anybody making a payment abroad or receiving payments from abroad.
• Afex – LA based Afex was founded in 1979 and has established itself as a niche provider of bespoke foreign exchange services.
• Moneycorp – Also founded in 1979 (although this time in London and now owned by the Bridgepoint Group) Moneycorp is now globally established as one of the leading transfer and foreign exchange treasury providers for both business and personal customers.
• OFX – Founded in Australia in 1998, the OFX business model now focuses on SMEs and high value customers. They can offer competitive foreign exchange services at volume but are less suitable for lower amounts. As such they are suitable for b2b payments.
• Global Reach – Specialising in corporate foreign exchange services, Global Reach offers a bespoke, consultancy based approach tailored to their business clients’ needs.
• AirWallex – A relative new-comer, AirWallex is essentially a virtual-bank like Monzo or Revolut who offer fx payment services as well as other foreign exchange services in the form of multi-currency accounts.
• Tipalti – Tiplati is actually a payment API and accounting software tech start-up. They offer a whole raft of different business services including both domestic and foreign payments. While foreign exchange services are not their primary focus, they can help businesses make foreign payments by helping to identify the optimal exchange rates.

What This Means For The Banks

Ever more SME’s and high-net worth individuals are forsaking the banks, and having their foreign exchange needs serviced elsewhere. This means that the banks are losing an easy and steady income stream. So the question is, how concerned are they about the decline in their foreign exchange payment monopoly?

Well, judging by the lack of response, the banks don’t appear very concerned at all. None of the UK’s major banks have made any attempts to woo these lost international transfer customers back by reviewing either their fees or fx mark-ups.

This is simply because the industry is not significant enough for the banks. While the costs and fees feel high from the customers perspective, the profits are negligible from the banks point of view. Furthermore, the onboarding and KYC requirements that the bank has to undertake before they can process a customer money transfer or FX transaction can prove time consuming.

However the banks do retain some interest in foreign exchange in that they handle large volume currency sales directly to currency brokers.

Final Thoughts – The Best Way To Make an International Payment

As we have seen, the fx payment sector is booming. There are now many challengers offering low cost international payment services who can help SMEs save valuable money when making a payment abroad, receiving payments from abroad or making b2b payments.

Making a foreign exchange payment is now cheaper and easier than ever and some of the providers even offer bespoke advice, hedging services and foreign exchange treasury management services. Truly, we are living in a golden age.