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Extraordinary Exchange
My Business Magazine - 30 January 2002Small business and consumers are losing millions of dollars in foreign
exchange transactions each year, according to Australia's fastest growing provider of online foreign exchange services, OzForex. Managing director Matthew Gilmour used a simple test to shed light on the plight of small foreign exchange customers, canvassing forex quotes from six major providers, five banks and one non-bank - to buy £8,000 to send to the United Kingdom by telegraphic transfer.
The results showed the best provider on the day charged a margin of around 1.2 per cent on the underlying "Interbank" rate, with the worst provider charging a margin of over 2.0 per cent. Each 1.0 per cent of margin equates to around A$230 of extra cost on the British Pound purchase, before additional transfer costs are paid.
"Thousands of small and medium-sized businesses around Australia are doing exactly these sorts of transactions through their banks every week, often resulting in thousands of dollars extra costs each year," Gilmour claims.
OzForex (www.ozforex.com.au) aims to be the "Aussie Home Loans" of the foreign exchange industry by bringing a better deal to smaller customers. Gilmour promises the service and the pricing enjoyed by the 'big end of town' to smaller businesses and individuals. Launched in 1998, the site has over 100,000 visitors per month. The company's growing client base includes SMEs that import and export goods, as well as immigrants and expatriates moving countries, and individuals investing overseas who want to hedge against currency movements.
Unlike the sharemarket, where investors big and small have access to the same
price to buy or sell shares, foreign exchange is not a level playing field, says Gilmour. "Price transparency depends very much on where you are in the food chain," he says.
"Larger corporate and institutional customers can see and deal at professional market rates - but smaller customers have little idea where the real market is and deal on rates that can cost them hundreds, sometimes thousands of dollars more than necessary on each transaction. While it is fair that smaller volume deals attract a different price, most customers would be shocked at the size of these margins and the dollars involved."
Original Article
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