FX spot transactions: A practical guide for businesses

The FX spot transaction is a staple for many multinational SMBs. But how do spots really work?

Let’s cut right to the chase and break down what FX spot transactions are, when businesses like yours typically use them, how they differ from forward payments, and what to look for in a provider if you want more control over your international payments. 

What are foreign exchange spots?

A spot FX transaction is exactly what it sounds like: An exchange of one currency for another "on the spot" at whatever the current market rate might be. No long-term commitments or contracts.

When you execute a spot transaction, the settlement (when the funds actually move) usually happens within two business days — what some providers call "T+2." Some currency pairs might settle even faster, especially those involving major currencies like USD, EUR or GBP.

What is the FX spot rate?

The rate used for your spot transaction is called the "spot rate". It's essentially a snapshot of what the market is offering at that exact moment. Think of it as a real-time reflection of global supply and demand for those currencies. When the euro is in high demand, its value goes up against other currencies. Low demand? The value drops.

What most banks and some providers won't tell you is that the final spot rate they quote you is actually a blend of two components:

• The mid-market rate
• And any markups added by your payment provider to process the transaction

That’s why the rate your bank or provider offers isn't quite what you see when you Google the currency pairing. The difference is their profit margin. That’s also why the spot rate can vary significantly from one provider to the next.

Traditional banks might add markups of 3-6% on their foreign exchange transactions, while specialised providers like iBanFirst typically offer more competitive rates.

Bottom line: The spot rate you're quoted directly impacts how much value you'll get when converting your money. So it pays to do your research and find the best provider for international transactions rather than simply using your existing bank.

FX spots vs forward payments

So we've covered what spot transactions are. But what if you don't need to exchange currency "on the spot" and instead need to make a payment three months from now? Do you just have to ride the exchange rate rollercoaster and see what the rates happen to be when the time comes to make your spot transaction?

Short answer, no. That's where deliverable forward payment contracts come in.

Deliverable forward payments let you lock in today's rate for a future currency exchange. They're protective failsafes for your international payments, helping reduce the impact currency market fluctuations can have on your bottom line. Depending on your needs, you can choose from several different types of deliverable forward payment contracts:

• Fixed forward payments: Lock in both the rate and settlement date for the full amount. These work best when you know exactly when you'll need to make a payment and for how much.
• Flexible forward payments: Lock in a rate but give yourself the freedom to draw down portions of the total amount over time — ideal when payment dates are spread out or uncertain, like with a phased project.

• Dynamic forward payments: Offer the best of both worlds — a guaranteed rate with the potential to benefit if market rates improve by the time you settle. It's like having a safety net with upside potential.

Key differences between spots and forward payments

Here's how spots and forward payments differ:

• Timing: Spots settle almost immediately, while forward payments are scheduled in advance for future use.
• Rate exposure: With spots, you get whatever rate the market offers at that moment. Forward payments can protect you from any unfavourable rate swings.
• Formality: Forward payments involve a formal agreement and may require a minimum transaction amount. Spots can be done for virtually any amount without special arrangements.

Put simply, spots are like buying an item at the store today at whatever price is on the tag. Forward payments are like pre-ordering that same item at today's price even though you won't receive or pay for it until a later date. 

When do businesses typically use FX spot transactions?

Think of spots as your go-to option whenever you need to make an international payment quickly or when you're comfortable with the current exchange rates. They're what most companies reach for when handling their day-to-day cross-border transactions.

Here's when small and medium-sized businesses commonly use spot transactions:

• Immediate international payments: When an invoice arrives with "due upon receipt" and you need to pay a supplier or partner ASAP, a spot transaction gets it done. Many businesses use cross-border payment providers to execute these payments quickly and efficiently.
• Currency conversions within your accounts: Need to convert euros into dollars for upcoming expenses? If the current rate looks good, many businesses convert funds "on the spot" between currencies they already hold. This is especially easy with a multi-currency account where you can hold various currencies under one roof.
• Simplified supplier payments: For businesses that pay suppliers abroad on a recurring basis and aren't worried about minor exchange rate fluctuations, spot transactions provide a straightforward way to handle these regular expenses.
• Customer payment receipts: When customers around the world pay you in their local currency, those payments often come through as spot transactions.

The beauty of spot transactions? Simplicity. No complex contracts to sign, no minimum amounts to worry about, and no future commitments. Just a straightforward exchange at today's rate, completed within a couple of business days.

For many SMBs with international operations, these quick, uncomplicated transactions form the backbone of their day-to-day currency management.

When might you use a forward instead?

While spot transactions work great for immediate needs, they leave your business exposed to whatever the exchange rate happens to be on the day you need to make a payment.

That's fine when rates are stable or when currency fluctuations won't significantly impact your bottom line. But what about when they might?

Many businesses find forward payments to be valuable in specific scenarios:

• Known future payments in foreign currencies: If your business has signed an agreement to pay €100,000 for equipment in six months, a forward payment contract lets you lock in today's rate. This eliminates the uncertainty of what that payment might cost you when the invoice actually comes due.
• Tight margin operations: Businesses operating with slim profit margins often can't afford sudden swings in currency values. For these companies, even small exchange rate movements can mean the difference between profit and loss. Many use forward payments to create budget certainty.
• Projects with phased payments: Think construction projects, large equipment orders or other engagements that happen in stages. When you need to make multiple payments in a foreign currency over time, forward payments offer protection while maintaining scheduling flexibility.
• Import/export operations: Companies that regularly get paid in foreign currencies or need to pay suppliers abroad often use forward payments to protect their pricing structures against currency volatility.

How to choose the right provider for your FX payments  

Let's get real for a second. Your bank probably isn't giving you the best deal on foreign exchange. Most traditional banks treat FX as a profit centre, not a service — which means you're likely leaving money on the table with every international payment.

So, what should you be looking for in an FX provider?

Transparent pricing that doesn't reserve the best features behind tiered plans

Ever tried figuring out exactly how much your bank charges you for international payments? It's like trying to solve a mystery without any clues.

Some providers may advertise "no fees" or show you a low-cost transfer fee like €5 to send a wire transfer — but then hit you with inflated exchange rates that silently eat into your payment value. What you want is clear, upfront pricing where you can see:

• Exactly what markup is being applied to the mid-market rate
• Whether there are any fixed per-transfer fees
• If there are any hidden receiving fees that will reduce what your beneficiary gets

Businesses that regularly make cross-border payments often find that specialised cross-border payment providers offer significantly better transparency — and better rates — than traditional banks.

FX risk management tools that protect your bottom line

As we've discussed, if you're just making occasional international payments, spots might be all you need. But as your business grows, so does your exposure to currency fluctuations.

Look for a provider that offers currency risk management tools like forward payment contracts so you can lock in exchange rates in advance when it makes sense. This means you can secure your profit margins regardless of what happens in the markets.

The difference between a basic provider and a great one? Access to different types of forward payments (fixed, flexible, and dynamic) that match your specific business needs — plus experts who can help you choose between them. Which leads us to...

Real humans who understand your business

Human support? In 2025? It might sound crazy, but yes — when you're moving large sums of money internationally, sometimes it’s far better to interact with an actual human being. Not a chatbot, not a support ticket system, but a real person who understands both FX and your business inside and out.

So, look for a provider that offers access to FX payment experts who can support your payment patterns and unique business needs. When currency markets get volatile or you need to make a complex payment, having an expert on speed dial makes all the difference.

Multi-currency capabilities that put you in control

Tired of your international FX payments feeling like a mysterious black box managed by your bank? Take control of your cross-border experience by adopting a multi-currency account, so you can hold, send and receive funds in different currencies. A multi-currency account lets you open individual currency accounts for each foreign currency you do business in, so you don't need to convert everything back to euros along the way.

Think about it this way: If you're home currency is euros but you commonly send and receive US dollars, Chinese yuan, pounds and so on, why should you have to convert everything back to euros? 

This approach gives you complete control over when to exchange currencies, so you can take advantage of favourable rates rather than being forced to convert at whatever rate is available when a payment arrives.

Plus, having all your currencies under one roof gives you something else that's incredibly valuable: Clarity. You get a real-time snapshot of your cash position across all currencies without needing to stitch together fragmented balances from multiple bank accounts, potentially with multiple banks. Just one dashboard that shows you all of your international incomings and outgoings, making financial planning infinitely easier.

Get started with iBanFirst today  

FX spot transactions form the backbone of international business payments for many SMBs — quick, straightforward currency exchanges at today's rate.

But as we've seen, there's more to managing foreign exchange risk than just spots. From adopting forward payment contracts to taking control of your payments with multi-currency accounts, having the right tools can make all the difference for your bottom line. The key is finding a transparent provider that gives you control and flexibility — and truly supports your business’s strategy.

Thousands of growing multinational SMBs trust iBanFirst with their international payments. Ready to join them? Here's how iBanFirst can help:

• Multi-currency accounts that let you hold, send and receive funds in 25+ currencies — all with zero monthly fees and complete visibility of your cash position.
• Cross-border payments with clear and competitive rates and detailed payment tracking, so you always know where your money is.
• Currency risk management tools like fixed, flexible and dynamic forward payments to protect your margins from market volatility and in-house FX experts who can help you along the way.

Request an account today and discover why specialised cross-border payment providers outperform traditional banks for businesses just like yours.