Bitspark is a bankless money transfer company that helps you convert cash to cryptocurrency, globally.
Whether you need to need to transfer money overseas as an individual or for business purposes, finding the best money exchange provider can be a challenge. If you don’t do your homework, you might end up losing substantial amounts of money in hidden fees and bad exchange rates. Follow this guide to make the decision easier when looking for a money exchange provider and get the most out of your money transfers.
Understand how exchange rates work
It’s important to understand how exchange rates work before you commit to using a money exchange provider. When you look into it, you will no doubt come across many different terms that sound similar such as money rate, spot rate, buy/sell rate and mid-market rate. While they all refer to exchange rates, the one you need to focus on is the mid-market rate, or sometimes called the interbank rate.
This is the rate banks use when they trade currencies on global markets. For their retail customers, banks and exchange services often add a mark-up to the mid-market rate and keep the difference as a profit.
Compare exchange rates with different providers
Find the mid-market rate for your currency pairing and compare that with the exchange rate you are offered by the provider you are interested in, to see if it’s fair. To make proper comparisons, it is important to do one right after the other as exchange rates tend to change by the minute.
What makes this process complicated is that many exchange services often provide different rates for different channels or currency products. With some retail channels, ordering online could offer a better exchange rate than walking into an agent’s shop for spot currency conversion. But the reverse could be true with the same provider when pairing two different currencies.
It’s not a straightforward process, but keep in mind that the rates you are offered depend on some of the following factors:
Uncover hidden fees
Avoid being ripped off with a poor exchange rate and make sure the rates being used by your provider are clear before you make the transaction. If a money exchange provider says they offer zero fee or zero commission exchange rates, this is often a warning to check the exchange rate and look for mark-ups.
Mark-ups are added to the exchange rate for no real reason and should therefore be considered as just another fee. But mark-ups are different than flat transaction fees because the way they are structured is not transparent at all. With transaction fees you will know the cost upfront, but the real costs of mark-ups and “zero fees” are often hidden in a poor exchange rate.
The easiest way to find out what the hidden charges are, is to compare the final amount of money that will eventually reach the recipient. Take the same amount of money and ask a few different providers how much will be received by the recipient after all fees and costs have been deducted. This is probably the easiest approach to uncover hidden fees or bad exchange rates when you are comparing traditional money exchange providers that tend to lack transparent cost and fee structures.
New ways of sending money and making payments
Addressing the complexity and consequent high costs of money exchanges, new companies have emerged offering alternative ways of making money transfers using innovative technologies.
Bitspark, for example, uses stablecoins to facilitate money exchanges on the decentralised exchange. This means the rates for currency pairings are determined by the global market and crypto traders which makes this a much faster and cost-effective alternative when compared to traditional money exchange providers. Another example is TransferWise which connects local bank accounts across borders to reduce bank to bank transaction costs. You can find a list of the best payment providers in Asia here.