Comparing Currency Brokers and Banks for Foreign Exchange

Let's Explore the Differences Between Currency Brokers and Banks!

Most people are aware of a bank and the services that it provides, but for those who don't regularly transfer money internationally, currency brokers may be a brand-new service.

So, what is a currency broker?

In the simplest terms, currency brokers facilitate the exchange and transfer of different currencies. Currency brokers help people and businesses transfer money internationally, it is their expertise.

This allows currency brokers to offer greater exchange rates and usually, much lower fees compared to other international money transfer services, like a bank, for example.

When sending money abroad, looking at various currency brokers and comparing what they offer vs your bank will be part of the process, so with that in mind, let's compare them and showcase their differences!

Table of contents:

A collection of different coins from all around the world symbolising foreign exchange.

Currency Brokers vs. Banks: What are the Main Differences?

In today's world, where businesses and individuals need to engage in international transactions, currency exchange has become an essential service.

Whether you're a business trading internationally, an expat who wants to send money home, planning a holiday abroad or looking to purchase or sell a property overseas, the need to exchange currency arises regularly.

Traditionally banks have been the standard option for foreign exchange services, but, in recent years, currency brokers have emerged as a popular alternative. But why?

Firstly, Banks are financial institutions that offer a broad range of services, including foreign exchange. Although it is a service that they have provided for decades, offering customers the ability to convert currencies, it has become less of a focus for banks compared to domestic transfers.

Currency brokers on the other hand have one sole focus, which is exchanging currency for customers, and because of this can offer a range of currency-related services like spot contracts, forward contracts, and market orders all to help customers save money against fluctuating exchange rates.

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A Key Differentiator: Exchange Rates

One of the most significant differences between currency brokers and banks is the exchange rate they offer.

Banks often provide less favourable exchange rates due to their larger overhead costs and the markup they apply to cover various expenses. This markup is in comparison to the mid-market rate, which customers cannot receive.

The markup that banks apply can result in higher costs for customers, especially those looking to make large international money transfers. You may also find that banks tend to be less transparent about their exchange rate offerings, which can make it difficult for people to know exactly how much they are likely to pay.

We'd always recommend calling your bank to find out their customer rates for international transfers to get the best comparison vs other money transfer services, like a currency broker!

Currency brokers typically offer more competitive exchange rates than banks and it is one of the reasons why people have started to use them more.

As foreign exchange is their speciality (no domestic services), currency brokers have lower overheads, and it allows them to provide customers exchange rates with smaller markups (rates that are closer to mid-market). You'll also find that currency brokers are more transparent about their rates, allowing customers to know how much they will pay, in advance before committing to using their service.

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Transfer Fees: Hidden Costs to Watch Out For

One of the big considerations people have when transferring money internationally is the cost and what kind of fees are charged by the various services available.

It is no secret that banks charge the highest transfer fees associated with sending money abroad on the market, depending on who you bank with, and the currencies you're looking to exchange, transfer fees can range between £5-£40, alongside unfavourable exchange rates. Some of these additional fees include:

Fees for making the transfer.
Receiving fees. Some banks may charge the recipient for receiving the funds from abroad.

The reasons for these additional fees are due to the larger-scale and at times more complex operations that are in place for banks to send money to another bank internationally. This can impact overall transfer times as well, causing money to arrive to a recipient much slower, around several days to complete if there are other issues with the transfer (incorrect information, etc.)

It's important to note that fees added by banks are done per transfer, so for those looking to make regular international payments, using your bank can become costly.

In comparison, currency brokers typically have much lower transfer fees or like ourselves at EasyFX, do not add on any transfer fees for sending money abroad for customers, regardless of the amount.

Most currency brokers make money from the small spread they add to the exchange rate.

When it comes to speed of transfer, currency brokers often have the upper hand too.

As foreign exchange is the focus, currency brokers have better and more streamlined operations, being able to execute international money transfers much quicker, sometimes offering customers same-day transfers, depending on the currencies.

For businesses looking to exchange large sums of money regularly or individuals sending remittances consistently, using a currency broker instead of a bank can help avoid unnecessary costs.

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Customer Service and Support

Banks have a wide range of services and typically a large customer base which results in more generalised customer support. Although they do have foreign exchange desks, personalised support isn't always available.

Customers may find themselves dealing with automated systems, which can be frustrating when you need to transfer money quickly or are dealing with sending large sums of money abroad.

Support is another area where currency brokers excel. As experts in exchanging currency, brokers will offer personalised, 1 1 support that meets customer requirements.

When using a currency broker, a lot of the time, you will find that dedicated account managers are waiting to help you with your transfer and any further questions you might have.

This support is extremely valuable for businesses and individuals hoping to get more value for their money, as we've mentioned before, exchange rates fluctuate every day, so having expert help managing this and providing advice can go a long way.

What are the Risks Associated with Using a Bank or Currency Broker?

When considering the safety and security of your money it is important to make sure that the service you're using is regulated and authorised by governing bodies and adhere to their strict standards.

Banks are consistently subject to regulatory oversight, and audits and abide by stringent consumer protection laws. This provides a high level of security and reassurance for customers when looking to send money abroad.

If you're thinking of using a currency broker then it is important to research the companies you are considering and make sure that they are regulated and authorised, at EasyFX, we're authorised and regulated by both the FCA and FINTRAC to conduct international money transfers for customers.

Usually, reputable currency brokers will clearly state that they are regulated by authorities on their communications and websites. Always make sure to check for this to ensure you're dealing with a legitimate currency broker for your money transfers.

Which Service is Better at Managing Currency Exchange Risk?

The international money transfer services that banks offer are much more basic, so for corporations looking to regularly send money overseas and don't want to lose out due to the nature of fluctuating exchange rates, a bank may not be the best option. Some banks do offer forward contracts and other hedging tools but the support and guidance are usually minimal.

Currency brokers do offer a wide range of products and services that help businesses and individuals manage potential FX risk. Whether it's locking in an exchange rate for a future date with a forward contract, or utilising market orders, allowing customers to target specific rates for their transfers. Coupled with experts in foreign exchange, currency brokers are certainly the best option to navigate the currency market and get the best value.

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Comparing Currency Brokers and Banks: A Summary

When deciding between a currency broker and a bank for your foreign exchange needs, the right choice depends on the specific situation.

If you value convenience and already have an established relationship with your bank then using their foreign exchange services might seem like the simplest option. However, if you're looking to maximise the value of your money transfer, reduce fees and receive personal guidance throughout the process, a reputable currency broker will be the best option.

For businesses and individuals dealing with large money transfers, or those needing support to manage potential FX risk, the specialised services and competitive exchange rates offered by currency brokers can also provide significant advantages over using a regular bank.

On the other hand, individuals who only need to send money overseas as a one-off may find a bank's services sufficient, especially if the priority is the safety and security of the funds.

Overall, the decision comes down to personal priority, whether that be cost, speed, customer service or the range of services offered. By carefully considering these factors and comparing, you can choose the option that best meets your foreign exchange needs and ensures that your money transfer is made efficiently and successfully.

Make your Foreign Exchange Easy, with EasyFX

At EasyFX, we understand that navigating the complexities of sending money abroad can be daunting.

With so many factors to consider, our goal is to make foreign exchange Easy, for everyone.

Our team of expert brokers can help you through the process of transferring your money internationally, and find you a favourable exchange rate that won't result in unnecessary high costs.

You can get in touch with us directly or open an account in less than 15 minutes, once verified you'll be able to utilise our mobile app and online portal, whichever way suits you best to transfer money overseas.

Unlike other transfer services that specialise in small or large money transfers, we can support customers with both and do so with no transfer fees and no transfer limits.

As an FCA and FINTRAC authorised and regulated Electronic Money Institution, your money will always be safe and secure in client segregated accounts, throughout the whole transfer.

Join over 40,000+ happy customers who trust EasyFX with their international transactions every day.

Whatever your foreign exchange requirements, we can help you, so please get a free transfer quote today to get started!

Need to send money abroad? We can help!

At EasyFX, our goal is to make international money transfers affordable, smooth, and easy, for everyone. Whether a small transfer or large transaction, we can cater to all types through our money transfer app, or our expert brokers, who are ready to find you the best rate available, saving you money.

If you'd like to receive a free transfer quote, please contact our team today!

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