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5 common misconceptions about currency exchange exposed

Whether you have a business in the import and export space or you’re an individual moving money abroad for investment or as a prelude to emigrating, there are many reasons why you might need to transfer a large amount of money from South Africa to an overseas location and vice-versa.

When it comes to doing so, it’s easy to fall for typical myths that are perpetuated by both the industry and the wider public. Believing these comes at a cost, too. Not only are you likely to have to spend a lot more time trying to complete a transaction, but you may also end up spending far more on the transaction than you should.

By understanding what these myths get wrong and uncovering the actual truth behind them, you’ll be in a much better position to get full value out of every transaction.

Myth 1: Your bank is the best international money transfer provider

“Understandably, people think their banks are their best bet when it comes to currency exchange providers,” says Harry Scherzer, founder of Future Forex, a South African fintech that specialises in international money transfers. “After all, if their bank looks after all of their other financial needs, why shouldn’t it also handle their international money transfer needs?”

“In reality, however, banks are terrible when it comes to customer service,” he adds. “ This can be a big problem when you’re dealing with something as complex as currency exchange. It’s also worth noting that banks tend to lack transparency in their currency exchange pricing, meaning that people end up paying much more on a transaction than they should.”

Scherzer instead recommends using an independent international money transfer provider that emphasises customer experience and transparency. In doing so, you can experience a white glove service with a dedicated Account Manager who fully understands your business or your individual needs.

Myth 2: Day to day exchange rate fluctuations won’t really impact your international transactions

“If your only experience with exchange rates is at the end of a business news bulletin on the radio, you might assume that exchange rates are relatively fixed, at least on a day-to-day basis,” says Scherzer. “In truth, exchange rates fluctuate dynamically in real-time.”

While those fluctuations are usually relatively small, they can impact how much money you come out of an exchange with. And the larger the amount being exchanged is, the bigger the impact will be.

As Scherzer points out, consumers aren’t all on their own when it comes to dealing with these fluctuations. By using an international money transfer provider that offers forward exchange cover (FEC), for example, companies and individuals can give themselves more certainty than they’d have otherwise.

“FEC is a financial tool used to manage the risk of fluctuations in exchange rates,” Scherzer explains. “In essence, the company or person making an international payment enters into a contract with the payment provider to exchange a specified amount of one currency for another at a specified exchange rate on a future date. This is particularly useful for importers looking to make their purchasing costs more predictable in Rand terms, or taking advantage of a strong Rand before the need to make payment to a supplier.”

Myth 3: You have to time your currency exchanges

Another area where FEC can be helpful is avoiding having to time your currency exchanges according to bigger fluctuations in the exchange rate. While there are benefits to doing so, it’s untenable for most business transactions.

“FEC brings a lot more certainty to currency exchange transactions and means that you can take advantage of a currency fluctuation without it impacting your payment cycle,” says Scherzer.

Myth 4: The rand would be much stronger without interference from the banks

When Standard Chartered agreed to pay a R42 million-plus fine for rand manipulation in late 2023, many assumed that its actions and those of other banks under investigation were the reason for the rand’s relative weakness to other currencies. As Scherzer explains, that simply isn’t the case.

“While currency rigging is obviously morally and legally wrong, the actions taken by those banks found guilty of it, covered fractional percentages of the currency’s value,” he says. “The fundamental issues affecting the strength of the rand – including global socio-political issues, load shedding, and the general state of the economy – have a much bigger influence.”

Myth 5: Every international transaction takes the same amount of time

You might assume that in today’s technologically advanced world, all currency exchange transactions happen instantly. In reality, there can be significant variations in how long a transaction takes. While some international transactions are processed within a day, others may take a number of days. According to Scherzer, that makes choosing the right provider even more important.

“Ideally,” he says, “you should look for a provider that makes that transfer process as quick and smooth as possible, while also being able to instantly lock in the best market rate available when converting your funds between currencies.”

Give yourself the best chance for a good exchange

“The myths surrounding the currency exchange space can have a significant negative impact on the people making international transactions,” Scherzer concludes. “It can cost them time, money, and even their mental well-being. By recognising these myths and how to bust them, people can give themselves a much more rewarding currency exchange experience, particularly if they work with the right provider.


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