Today we live in a world of price-comparison services, consumer review websites and coupon-sharing communities. Shoppers have more power than ever before and there is no reason to pay over the odds for any product. In spite of this, around 90 per cent of consumers use high street banks to transfer funds to a foreign currency. Even holiday-home owners and expats, people who you would expect to be quite savvy when it comes to getting a good deal on foreign currency, are quite happy to use their bank for Forex transactions.
This is a sad statistic because banks rarely offer the best deal. There are many alternatives to banks for changing currencies. Even traditional brokers offer lower charges and better rates than most banks, and they’re often able to complete bank transfers more quickly than a traditional bank too! However, there’s a new form of money transfer option that is gaining popularity — peer to peer currency exchange services. These services cut out the middle man and can potentially save you a fortune.
Protecting Your Cash
One reason why so many people stick to using their bank for foreign currency transactions is that they are scared of being ripped off. This fear is reasonable, because it is quite easy to set up a business as a broker. All they have to do is create a website that looks professional and then register with the Financial Conduct Authority. Note that registering with the FCA is not the same as being “authorised” by the FCA. A company that is authorized by the FCA must comply with stricter guidelines than the companies that are just registered. They have to provide guarantees regarding how they will hold the cash of their clients, and they have to satisfy the FCA that they are financially healthy.
Banks seem a safe bet to cautious investors who do not want to have to worry about finding out whether a company is merely FCA-registered or actually authorized by the regulator. However, for customers who are willing to practice due diligence, there are many attractive and affordable alternatives to banks. Peer to peer currency exchanges are a viable alternative to both banks and traditional brokers. They effectively cut out the middle man and allow consumers to trade with each other directly.
How Peer to Peer Works
When you use a peer to peer currency exchange system, you state that you want to purchase a specific currency and are looking for a particular currency in return. For example, you may be selling US dollars in exchange for British pounds. The system will then match you with another consumer who wants to buy British pounds in exchange for US dollars. The exchange system will take a small fee, but the fee is usually clearer and more favourable than the one that a traditional bank or broker would charge.
If you need to exchange money on a regular basis, then it is well worth investigating trading options other than traditional banks. You may be amazed at the number of options that are available to you.