Preparing for a foreign exchange transaction and international transfer may seem like a daunting task. This step-by-step guide should help explain the costs, process and risks to help you send and receive more money by making an informed decision about foreign exchange.


1) Find out how much you can really save

One of the key benefits of using ibanex instead of your bank is the actual exchange rate you get when converting currency and sending it abroad. There are two main ways we can help you save money:

  • Converting money at a better exchange rate

We will always offer better exchange rates closer to the interbank mid-market rate. A banks typical rates may be up to 5% from the mid-market rate whereas we can offer exchange rates of less than 0.4% from the mid-market. On a conversion of £100,000 that would potentially save a customer £4,600.

  • Locking in a beneficial exchange rate up to a year before you need foreign currency

The price of one currency against another can move significantly over the days, weeks and months leading up to a currency conversion. We can lock in a favourable exchange rate for settlement up to a year in advance on a “buy now pay later basis” with a forward contract. Some currencies can move up to 10% in 6 months, potentially saving up to £10,000 on a £100,000 transaction.


2) Getting the best exchange rate

Ensuring you get the best possible exchange rate at the time of the transaction is imperative to cost-effective foreign exchange. When you request a foreign exchange quote a broker or bank will usually quote a price based on a percentage from the mid-market. This is generally known as the spread, margin, markup, basis points, pips or clean/dirty price.

Whatever terminology is used the principle is the same, the cost to you is the difference in price between where your bank or broker buys or sells money and the price at which you as a client send or receive it.

When you convert funds with us you are able to see in real-time where the underlying currency mid-market is as well as your price.

By providing client exchange rates at a fixed percentage from the mid-market we are able to provide total transparency in our fees and rates, which will be at a significant discount to the banks and competition.


3) Reducing your risk by using currency forwards

It is possible to lock in beneficial exchange rates for transactions up to a year in advance.

Using currency forward contracts can help predict cash flow and future costs without the worry of currency prices moving against you.

If for example you have £12m to convert into EUROs over the course of a year (£1m a month), but were worried that the exchange rate may move against you, therefore reducing the amount EUROs you receive as time goes on. We can convert £12m up front and split it into 12 different settlement dates a month apart. A small deposit would be required of between 5% and 10% but the balance of each transaction would not be due until the currency is needed and the conversion settles.

As an example, the GBP/EUR price has moved almost 5% over the last 6 months – which can have big impact on receivable EUROs.

8 months ago converting £1,000,000 GBP was worth EUR 1,159,900. Today (11th Dec 2018)  £1,000,000 GBP is worth EUR 1,102,300. Having a forward contract 8 months ago would have brought you an extra EUR 57,600 today.


4) FX costs explained: Zero % commission myth exposed

There is no such thing as zero 0% commission.  Foreign exchange fees are built into the exchange rate.

Your bank may charge an admin fee for each conversion, add commission on top of a widened exchange rate and there may be some charges for receiving funds into a foreign bank account.

When banks and brokers advertise FX as 0% they make it notoriously difficult to see your actual transaction costs. The transaction costs would be the difference between the mid-market and your price.

If you have an example of a previous foreign exchange transaction we can tell you how much you are being charged. It is possible to save several percent on the value of a transaction by switching to us.


5) An example of how the process works

Unlike your bank, each customer is assigned a dedicated account manager who can handle all aspects of the transaction and onward payments.
Your account manager will be familiar with your transaction types and be on hand to provide advice on strategy, market timing and assistance with administrative issues.

The below example assumes you are converting £1m into USD.

  1. When you want to convert money you either go online or give us a call and ask us to convert £1m into USD
  2. We convert £1m GBP into USD at an agreed rate, a fixed percentage from the mid-market.
  3. We send you a contract note with the breakdown of the transaction.
  4. You send £1m to our FCA regulated segregated client tier 1 bank account.
  5. When funds arrive and are matched we send the USD out. This can either be to your USD account or an international or domestic single or to multiple beneficiaries. You can even have them held in your e-wallet for as long as you like until you need them.


6) How ibanex can help…

ibanex provide the best rates in the business and are totally transparent with our pricing. Transparent quotes are a fixed amount from the mid-market interbank rate. When you request a quote online or with your dedicated adivsor they show the mid-market price as well as your rate. This is also shown on all your trade confirmations. We do not charge a commission or fee for onward payments – all our charges are built into the FX rate.

But more importantly, we can provide advice and strategy that will reduce your foreign currency exposure protecting the value of your money. Including a variety of ways to convert money:

  • Same day/spot – you can convert funds and have it sent out on the same day to either a single or multiple beneficiaries.
  • Future date/forward – you can lock in today’s rate and convert funds to be used at a future date with only a small deposit. This is a common method of protecting future purchases from currency fluctuations.
  • e-wallet – you can convert funds 24 hours a day and leave them in your online account for when you need them.


7) Getting pre-approval from your bank.

If you are making a one-off large foreign purchase you will need to send money from your bank to fund your account to settle the trade. Most normal bank accounts have limits on the amount you can send in one go without notice, so may cap payments at £10,000.

So make sure you notify your bank that you will be making a large payment. In some cases, you may need to provide our banking and settlement details to get it approved from your bank.


8) Receiving foreign currency from abroad.

One of the most expensive mistakes made when it comes to foreign exchange is receiving foreign currency into your GBP bank account. If you have funds coming in from abroad you could lose out significantly on the amount of GBP you receive if you allow your bank to manage the process.

When foreign currency is deposited into your GBP bank account the bank will generally do the conversion automatically at their standard rates.

Something else to avoid is letting the funds be converted into GBP before being sent to you, as this also results in large FX transaction costs.

Both of these scenarios mean you have no control over the exchange rate or timing of the conversion. Which could result in receiving significantly less GBP.

It makes sense to arrange for foreign currency accounts to be set up with your domestic bank, then convert funds into GBP at a beneficial rate using ibanex.

You can also use a currency forward to lock in the current exchange rate for a payment you are expecting up to a year in the future. By using a currency forward you protect yourself against the actual currency price moving against you and can budget accordingly.

We can even do one better where we provide you with a USD Virtual IBAN allowing the person sending you the USD to send them directly into your USD e-wallet like it was a local payment for them and allowing you to receive your USD either same day or next day. We can also provide you with this facility for Euros.


9) Online Currency Conversion & Back Office Trades

At ibanex we give the option to clients to choose to convert funds online or over the phone. Our online platform is available 24/7 (although you can’t convert on the weekends) where you can convert money, see live quotes, view your cash balances and check forward prices. You can also add regular beneficiary details and check audit trails of your previous conversions.

We are experienced currency brokers and can handle all aspects of your transactions over the phone and are on hand to provide expert advice on foreign exchange. With the highest level of service in the industry we believe all customers should benefit from the same service regardless of if they are a multi-national business or an individual making a one-off foreign purchase.


10) Getting your account in place beforehand

It is sensible to have your currency account open well before you may need to convert money or arrange an international money transfer.

We cannot tell you how many times we’ve seen clients leave it to the last minute to open a money transfer account, only to find out they need to supply ID documents or purchase confirmations. This process can take a few days although normally setup the same day. So make sure you have your account in place well ahead of any upcoming foreign exchange transactions regardless of the value as this may also give time to explore potential strategies to put in place for your benefit.

You can apply for an account online and the process takes less than a few minutes and is completely free with no obligation to utilise.