Traders work hard and spend a lot of time analysing the market to make sure that they invest wisely, but often drop the ball a bit when it comes to currency exchange. When they change cash into their home currency, they do not always get the best deal, which means that they end up giving some of their profits away to the currency broker.
Over time, using the right international money exchange can make a huge difference to how profitable your trading business is. Here we are tell you about peer-to-peer (P2P) foreign exchange, which can help you to save on currency exchange transactions and keep more of your profit.
How Peer-to-peer Currency Exchange Works
This form of currency exchange works by matching buyers and sellers of currencies. The way each transaction is managed means that banks and brokers are cut out of the process, at least to some extent.
For security reasons, the cash you want to exchange is not sent directly to the buyer. It is sent to a currency exchange firm that effectively acts as the broker, but a broker that charges extremely low fees.
They currency firm finds the buyers and sellers and matches them up to each other and acts as a conduit for the money. For this they charge a fee, but it is normally a flat rate fee, which can easily be quantified in advance of the transaction being carried out.
The banks are involved because the cash is held, all be it briefly, in a bank account. If there is no buyer for the currency normally, the exchange firm will buy it themselves. This helps to ensure that the service is reliable and accessible to all not just those who deal in the popular currencies.
Why you get a Good Deal
This relatively new exchange service offers a number of advantages over traditional currency exchange. Here are the main advantages:
Low Fees and a Good Exchange Rate
The main advantage of this kind of currency exchange is the fact that the midpoint or midmarket interbank rate is used for all transactions and most P2P providers charge a lower fee than many traditional exchange brokers do. This can be a significant saving because brokers often charge 1 or 2% on deals and banks up to 5%. Most P2P currency exchange firms charge around 0.10% for each exchange. For small transactions they normally charge a flat rate. If you take the matched trade route, the fees can be even lower.
The limits offered by peer-to-peer exchange firms are generous and flexible. Most firms do not set a minimum limit and their maximums are generous.
It is not uncommon to find firms willing to exchange as much as £1million per transaction. Many will deal with far bigger transactions if they know the customer and have a history of carrying out exchange transactions for them.
In many countries, these firms are well regulated. For example in the UK there are firms offering this service that are authorised by the Financial Conduct Authority (FCA). This means that funds are ring-fenced and held in a segregated client account. However, the security of the transactions is something you should research before signing up with and using a P2P exchange firm.
As you can see changing money via a peer-to-peer currency exchange firm has many advantages. Next time you need to move money between currencies we suggest that you take a look at firms that offer this service in your area.