Expenses Associated with Receiving a Money Transfer

Last week, the World Bank launched a groundbreaking dataset detailing what banks charge for converting foreign currency payments into local currency. This data has the potential to revolutionise the way businesses handle foreign exchange (FX) transactions, offering numerous benefits such as cost savings and informed decision-making.

The dataset applies to businesses receiving foreign currency payments, like a UK business receiving a USD payment into their GBP account. One of the key findings is that the costs of converting payments by recipients can often be more opaque than the costs to the sender. This new data aims to shed light on these hidden costs, providing valuable insights for businesses to minimise FX costs within their corporate group.

The data can be used in various ways, including helping banks and payment companies lower overall costs for customers, particularly on the receiving side where rates can be high. It can also assist businesses in negotiating better FX rates with their banks and payment providers. By understanding the costs associated with converting foreign currency payments into local currency, businesses can make more informed decisions about how to send and receive these payments to optimise costs.

Moreover, the data can be used to identify trends and patterns in FX pricing across different regions and industries. This information can help businesses strategise more effectively, for instance, by renegotiating invoicing currency from sender currency to recipient currency, or by convincing senders to do the FX conversion themselves.

Another example illustrates the importance of this data. In the case of a business or consumer in Hong Kong transferring 10,000 HKD to a UK bank account in GBP, they have a choice. They can either convert the money to GBP and incur FX costs on the send side, or send the money in HKD and let the receiver's UK bank convert it to GBP and charge various fees and an FX margin. With the new data, businesses can compare these costs between different banks and payment providers, potentially leading to significant savings.

Lastly, the data can be used to benchmark a business's current FX costs against industry averages. This comparison can provide valuable insights into whether a business is paying too much for its FX transactions and prompt action to rectify the situation.

In conclusion, the World Bank's new dataset offers a wealth of information that can help businesses navigate the complex world of foreign exchange transactions. By using this data, businesses can make more informed decisions, negotiate better rates, and potentially save significant amounts of money on their FX transactions.