Why would you not use a bank for FX?
by Kylene Casanova
Global Reach, a FX broker in London, has been trading for the last 16 years concentrating on SME business – typically trading between £250k - £100M of FX annually. Their most popular sectors are freight firms, manufacturing, travel, aviation, and importers/exporters. They believe that the main reasons why a company would use a broker like themselves rather than a bank are:
- Cost – in almost all cases they will execute the trade at a lower cost than the bank because they have lower overheads than a traditional bank which are passed on to their customers
- Relationship/Support – they work very closely with clients, no matter how small the account, each is assigned to their own currency dealer who manages the relationship
- Currency coverage – Global Reach traves in 140+ currencies and can provide exotic currency solutions. (Most banks, they claim, generally only cover around 50 currency pairs)
- FX Specialists – Globl Reach has been in the business for 16 years focusing purely on the currency markets
- Range of products – a broad suite of products available including FX Options, Forwards, Spot and Market Orders
- Credit terms – if the company has good cash flows they often extend credit for their trading activity, GR believe that most banks will not do this.
Increasingly fintech companies are attacking the SME FX market. One of the latest example is Revolut with their multi-currency account.
Large bank’s costs rule them out of SME market
The range and depth of FX services from Citi, who have been the leading FX bank in the Euromoney survey for many years, is huge and impressive, for example:
Other FX banks have similar services which have the same characteristic as Citi’s: they are costly to provide and keep up-to-date. Also the regulatory requirements increase bank costs significantly.
The only way the large banks can cope with the FX cost pressures has been to provide on-line trading platforms and withdraw their personal FX advice services.
Like this item? Get our Weekly Update newsletter. Subscribe today