Signs Your Foreign Exchange Provider Isn’t Right for You
Every business is different, and so is every foreign exchange provider. How do you know whether your provider is right for your business's circumstances?
August 19, 2020 — 3 min read
If you’ve been keeping up with our blog series on managing your company’s foreign exchange risk, you’ve likely seen us give one consistent piece of advice throughout the process: have a foreign exchange provider. Working with the right foreign exchange provider can help you reduce your business’s risk levels and improve the efficiency and efficacy of your international payments and other foreign currency dealings.
However, not every foreign exchange provider is the right foreign exchange provider. A provider can be knowledgeable, experienced and provide great customer service, but none of that matters if they don’t have the knowledge, experience, and service offerings to suit your business, its operations and its risks.
Not sure how to spot the right (or the wrong) foreign exchange provider? There are a few key qualities that you should look out for as you shop around.
What’s one of the biggest issues with foreign exchange providers?
One common problem that we see keeping businesses from effectively managing currency risk and securing the best value from transactions is a lack of flexibility. If your foreign exchange provider doesn’t offer enough flexibility in their terms, you’ll be limited in terms of what you can do.
Take hedging, for example. For some businesses, hedging would be a wise strategic decision, but not all providers offer a variety of options. You may be asked to make payments in advance or provide margin for forward positions, and not all companies are able or willing to do so. Even if your business is willing to meet a provider’s terms, they might not be best suited to your circumstances.
On the other hand, other providers could offer a wider range or more flexible credit terms that would account for your business’s needs.
What should you look out for?
We recognize that telling you to look for “flexibility” is a little too vague. When speaking with foreign exchange providers, take the time to discuss their solutions and strategies in detail and understand how rigid their processes are. Understand your business’s processes as well—this will help you to in turn know what to look for in a foreign exchange provider.
Let’s look at payment service, for example. When working with international currencies, it’s likely that you’ll need to make quick payments to different recipients in different markets, while still having plenty of time to make your transactions and ensure that everything is correct. Some foreign exchange providers may only offer one form of payment service. That could work well for them, but it could also be inconvenient or detrimental for your business. Ask your provider whether they offer different payment options, or if there’s any way to configure their existing model to fit your business.
Ultimately, you want to find the provider that can and will adjust their strategies and solutions to fit your business. Whether you’re looking for assistance with your day-to-day transactions or your long-term risk management strategies, it’s important that you feel that your provider understands your business and is offering the solutions that will best address your goals, rather than a standard one-size-fits-all solution.
Now that we’ve thoroughly discussed what not to look for in a foreign exchange provider, you may be wondering what you should look for and discuss with potential foreign exchange providers. All we have to say about that is…come back next week for the answer!
Want to know what Xe can offer a business? Visit our Business page for more information about our products, solutions, and strategies to assist with your organization’s foreign exchange risk management.