Changing foreign exchange

If you have property, investments or businesses in the United Kingdom or any other country outside the euro zone, you could save thousands on currency exchanges by using the services of a growing breed of foreign exchange (FX) specialists instead of the main banks.

The current weakness of the euro against sterling, the United States dollar and many other currencies means businesses and individuals with even limited exposure to foreign currencies may be losing out by not using a specialist.

One of them is Moneycorp, a global firm that opened a branch in Ireland in 2013. It deals mostly with corporate customers, but about 15 per cent of its business is with private clients who include investors with significant foreign currency investments.

According to managing director Bryan McSharry, Moneycorp offers consistently better FX rates, an online dealing and payments platform and no payment charges in many cases.

“We are a currency specialist,” he said. “That’s all we do, nothing else. So we have to be better at currency than everybody else or we wouldn’t have a business.”

Specialists may offer a more personal and responsive service.

“If you’re an individual with a summer house in the UK, and you want to have an engagement with a FX professional, you’re not going to get direct access to one of those at the bank,” said McSharry.

“But primarily we exist because we provide a better FX rate than a bank would,” he added.

With any international money transfer involving a currency exchange, banks will usually charge a fee or commission as well as an exchange-rate margin.

“Individuals generally get the worst exchange rates from banks as there is very little banking relationship,” said Barry Dowling, co-founder of TransferMate Global Payments, an online broker, which deals mainly with businesses but also caters for individuals.

“Exchange rates margins charged by banks to individuals may, depending on the bank and the currency bought or sold, be as high as 4 per cent.”

Based on exchange rates from September 11th, the firm claims that it can save customers in Ireland up to €366 on a payment of £10,000 compared with Irish banks.

As well as competitive FX rates, Moneycorp also offers customers – including individuals – the opportunity to create hedging strategies using “forward contracts”.

This is a facility that allows you to fix the currency exchange rate for up to two years in advance of a payment so you don’t have to worry about the market moving against you, which can be ideal for buying and selling property or making other large payments.

Of course, anyone who took out a two-year forward contract in 2013 would be making a significant saving now, but it’s still anyone’s guess if the euro will regain its strength or if it will continue to weaken against other currencies in the months to come. There are also peer-to-peer currency exchanges such as CurrencyFair, which differ from firms such as Transfermate, Fexco or Moneycorp in that they work by matching buyers and sellers of euro, US dollars, sterling and several other currencies.

You don’t send your money directly to the buyer (or seller); instead you send it to the currency exchange firm, which then passes it on.

CurrencyFair’s marketplace allows people to choose either to exchange immediately using the best rate currently available or offer up funds at a rate of their choosing and wait for another customer to match them.