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by David Wong, CEO, Midpoint Holdings Ltd.

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It’s time to fight back against the FX rip-off

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The business and retail foreign exchange market is an oligopoly designed to fleece the customer for as much as it can in several ways, with large bid/offer spreads (the difference between the rates they will buy or sell currencies) and opaque fees and charges.


A recent example: a well-known public relations customer of ours received $10,000 from an American client, which his bank converted and paid into his sterling bank account; when he changed it back for a trip to the US, he only received $9,000 for his sterling.


Another illustration is the scandal at American Express, exposed by the Wall Street Journal where small companies were offered attractive exchange rate deals, only to have their rates hiked up later without being told.


According to the report, current and former employees said they would tell potential clients they could beat the price they were paying, but didn’t inform them that the margin charged was subject to increase without notice.


The bank deliberately targeted smaller companies for over a decade knowing that it would not be challenged by its customers – and only stopped the practice when a similar scandal at Wells Fargo became public knowledge.


There is an argument for the ease and convenience of “one stop banking” – but is it worth tying yourself to your bank when the costs are so high? Is there anything that can be done to break free of the banking industry’s stranglehold on the foreign exchange market?




Currently, a growing number of smaller fintech competitors to the major banks offer better rates and a more competitive service. They undercut the high fees and margins, saving their customers large sums of money.


High-volume, low-value exchanges, such as holiday cash at exchange kiosks in airports or foreign ATMs, are subject to predetermined rates by the large financial institutions and the cost may not appear to be prohibitive per transaction. However, calculate the total cost of frequent usage over a longer period and it all adds up!


For anyone who buys a property abroad, the savings could be thousands of pounds per transaction – and for a business involved in regular foreign exchange transactions, the savings can easily run into millions.


What are the things to look out for when shopping around for better exchange rates?


The three main points to consider are: the bid/offer spread (profit margin on the exchange rate), transaction fees, and transmission costs (for sending money to or receiving money from a foreign bank account).


Typically bid/offer spreads for retail accounts can be as high as 10 per cent or more; for larger business accounts, this can range between 2 and 5 per cent. The smaller, more agile new competitors in the market will often charge 0.5 per cent to 1 per cent depending on the size and frequency of your transaction.


Can I reduce the spread even further?


Our company, Midpoint Holdings, has a new business model that is designed to provide the very best value for money. This is achieved by using technology, cutting out the intermediary party and providing clients with direct access to the wholesale interbank foreign exchange market – allowing companies to deal at the Midpoint of the bid/offer spread for a single 0.5 per cent fee.


Our research has shown that paying a competitive one-off fee and dealing at the midpoint rate will, on average, save £1,370 ($1,760) on each £100,000 traded for US dollars, and save £1,360 (€1,509) for each £100,000 traded for Euros[1].



For larger regular transactions the savings can be significantly higher. But what about “ease and convenience” in changing my service provider?


Midpoint will open a new account within 15 minutes (during normal office hours). The application process is completely free and entirely dealt with online. You can then effortlessly send or receive foreign currency, transacting at the midpoint without using a middleman.


So, unchain those banking shackles and free yourself for a better deal – you CAN play your role in the fight back against the FX rip-off!



[1] Source: Midpoint Holdings Ltd. as at 4/9/18

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