Any SME - SMI that has had to do foreign exchange transactions via its bank (international transfers in particular) can testify: the system is opaque and the costs high. However, today, solutions exist to provide SMEs - SMIs with real-time exchange rates, under economic and transparent conditions.
What is the real-time exchange rate?
Let's start by defining the concepts of exchange rate and real time exchange rate.
Exchange rate is defined as any operation to convert from one currency to another. The exchange rate is the conversion rate from this currency A to currency B, and is used to calculate the amount of currency B obtained in exchange for a unit of currency A.
The real-time exchange rate is the rate that fluctuates constantly, which can be tracked online today, without leaving home. It differs from the interbank exchange rate (also called the "mid-market"), the gross rate at which banks exchange currencies.
Why SMEs and SMIs do not benefit from the exchange rate in real time today?
This reference rate is an instant exchange rate and fluctuates according to the supply and demand expressed.
However, today, SMEs and SMIs do not always benefit from this real-time exchange rate when trading in foreign currencies. Why?
This is partly due to the fact that access to the trading rooms of banks is reserved for large companies. The latter benefit from a range of financial services, including real-time currency pair quotes. They can therefore have very favourable market conditions for their foreign currency transactions.
SMEs and SMIs, on the other hand, do not necessarily have the critical volume of foreign exchange transactions that gives access to trading rooms. In the current system, which is obscure and not well adapted to their situation, they are served and pay significant fees on each transaction in foreign currency.
The finding is as follows: once the instruction has been given to the bank for its supplier's payment order, the company does not know when the transaction will be carried out, and therefore does not know the rate at which the exchange will take place or the margin applied by the bank. The actual cost of the transfer will only be known after the fact.
The 4 benefits of the real-time exchange rate for SMEs - SMI
As mentioned above, the real-time exchange rate reflects the situation on the financial markets. If SMEs have the possibility to access it, they can use the exchange rate to carry out their transactions at the optimal time. That's why we created iBanFirst: to offer SMEs and SMIs the exchange conditions they deserve.
Being able to benefit from this exchange rate in real time offers 4 advantages to companies:
- Know: know the exchange rate at which the transaction will be carried out, before it is carried out. This provides transparency in foreign exchange transactions, from which SMEs - SMIs did not previously benefit.
- Choose: as the company will have all the data in a transparent way, this offers the possibility to freely choose to carry out its operation under these conditions, or to delay it in order to carry it out at a more favourable time.
- Ask: With this transparency, it is possible to ask advisors in intermediary structures, such as iBanFirst, for factual information to make an informed choice.
- Save: Since the company has all the cards in hand to choose the optimal time for its transaction, this can allow it to regularly save money on its transaction amounts.
How can a structure like iBanFirst offer SMEs - SMIs a real-time exchange rate, when banks cannot?
Technological development has made it possible to democratize access to foreign exchange-related financial services, including the real-time exchange rate. This has led to the emergence of new financial structures, such as iBanFirst, which, thanks to the volume of transactions of its clients, can have access to trading rooms, and therefore allow them to benefit from this famous real-time exchange rate.
Moreover, since the structure does not have the banks' fixed and historical costs, the commercial margin levied on foreign exchange transactions is infinitely lower than that applied by the banks.
SMEs and SMIs finally have access to the conditions they deserve, while saving on their foreign exchange transactions. If you too want to optimise your foreign exchange transactions, our account managers will be happy to tell you more.