5 key points to consider before exchanging currency
There are drawbacks, but making the wrong choice could either cost you a great deal in exchange fees over the long term, or have very serious consequences in the event of a cyberattack, for example.
• Exchange costs vary widely by provider (by up to a factor of 10), with specialist online services like b-sharpe generally being the cheapest.
• Providers requiring an in-person visit (exchange offices, international payment companies) have practical drawbacks: opening hours, queues, and possible currency shortages.
• The financial institution's security is also a key criterion to assess before choosing a currency exchange provider.
To help make things clearer and support you in your decision, here are a few criteria to consider when choosing your financial intermediary for your currency exchange transactions.
1. The cost of currency exchange
Since the foreign exchange market is what’s known as an OTC (over-the-counter) market, each financial intermediary sets its own rate. More precisely, the rate is made up of the interbank rate (common to all institutions) plus the margin charged by the financial intermediary you use for your exchange transaction. And it’s this margin that makes all the difference: the higher it is, the less favourable the exchange rate is for you.
Our advice: if cost is an important factor for you, choose your financial intermediary carefully, as costs can vary by a factor of ten! In order, from cheapest to most expensive: specialist exchange services such as b-sharpe < "physical" currency exchange bureaux < international payment companies < banks. For a short explanation of how a rate is determined, take a look at our video.
2. The practical side (time spent, handling cash…)
Some financial intermediaries are more convenient to use than others. Providers that require you to hand over money in person (such as bureaux de change or international payment companies) have several drawbacks in terms of convenience and security. You have to go there in person during opening hours — both to the exchange bureau and to the bank, to deposit (and/or withdraw) the money — there can be queues, and the currency in question may run out (as happened, for example, when the exchange rate floor ended in January 2015).
Our advice: currency exchange bureaux and international payment companies are financial intermediaries you’re required to visit in person. With 100% online financial intermediaries, on the other hand, there’s no time lost and no need to declare the money at customs.
3. The security offered by the financial institution
Is the money you send to a financial intermediary for currency exchange safe? With banks, the answer is yes. Financial institutions specialising in currency exchange don’t all offer the same guarantees in terms of protection and security. What’s to be said, for example, about an online currency exchange company that swears on its honour that it has enough liquidity to reimburse its customers in the event of a problem (such as hacking, misappropriation or fraud)?
Our advice: before using an online currency exchange company such as [name], ask what concrete guarantees are in place to protect your money. Without insurance, you should understand that you run the risk of never seeing your money again in the event of hacking, misappropriation or fraud, since there’s no guarantee the company in question can financially absorb such an event. Aware that security is a major concern for our clients and prospective clients, b-sharpe decided several years ago to protect its clients’ money by putting in place insurance against fraud, hacking and misappropriation that covers transactions up to CHF 3 million.
4. The reliability of the financial institution offering to exchange your currency
Not all players in the currency exchange market have the same reputation. On one side, banks are reassuring, but expensive — sometimes very expensive — resulting in unattractive exchange rates. Currency exchange bureaux, for their part, charge lower margins but are less convenient. On the other side, new players offer good terms, but it can feel difficult to trust them with your salary or the proceeds from selling your house without first assessing how reliable they are.
Our advice: if you decide to use a financial intermediary specialising in currency exchange, favour companies that have been around for several years, that have offices you can visit, and make sure they offer every possible guarantee: client accounts kept separate from the company’s operating account, along with insurance against fraud and phishing, are the bare minimum for a 100% refund in the event of a problem. If in doubt, check customer reviews — you’ll get an immediate sense of the quality of service on offer.
5. The speed of transfers
To help you decide, the last point we recommend taking into account is how long it will take to transfer your funds. Depending on the intermediary you choose, the transfer can take anywhere from 1–2 days up to 7 days. Find out how long the intermediary takes to complete your transaction. Here too, you can check customer reviews to see whether users complain about excessively long delays.
Our advice: if you choose an intermediary specialising in currency exchange and speed is an important factor for you, avoid companies based outside Europe or outside Switzerland, Germany, Italy or Austria. If you choose an intermediary specialising in Switzerland, bear in mind that the exchange isn’t just carried out on receipt of the funds — the funds are also transferred immediately, meaning you benefit from very short delays (within the day, or within 24 hours).
We hope these tips have helped make things clearer and will help you choose your financial intermediary for currency exchange.
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