Business Foreign Exchange Explained (+Best FX Rates) (2024)

If you own, manage, or control the finances of a business that trades internationally, then you should know business FX management is critical.

If you are wondering whether your business pays too much in currency exchange or business payment fees, then it is almost certain it does.

Banks are notorious for exploiting passive customers – it pays to be proactive if you want to save on business FX fees.

Small businesses are especially vulnerable.

No matter where your business is located – it could be the UK, USA, EU, Australia, HK, Singapore and many more countries – the chances are you are paying too much in fees on inbound and outbound international business transactions.

Meanwhile, many SMEs are not protecting their business against FX movements and have no business FX payments strategy.

Our small business & corporate foreign exchange guide wishes to change that.

We list the best business fx services and offer a complete market overview.

Annual Awards – Best Business Foreign Exchange Service 🏆

• 🏆 Best Business FX Service, Established 1979: Moneycorp
• Best Corporate FX Dealers: TorFX
• Best Diversity for Business Clients: OFX
• Best Online Business Payment System: Currencies Direct
• Best by Client Feedback: Global Reach
• Best FX Predictions: Halo Financial
• Best for a MultiCurrency Account: WorldFirst
• Cheapest Payment Gateway in UK: Square

What is Business FX? What do Corporate FX Specialists Offer?

Business FX is an inclusive name for foreign exchange / foreign currency management, incorporating both the development of an FX hedging strategy and the actual delivery of international payments.

Corporate FX specialists, despite the name suggesting otherwise, are not reserved solely for mega-corporations.

They are a subsection of firms known as a currency brokerage which offer FX services (fx payments, hedging and management in the form of multi-currency accounts) to businesses of any size (at least the ones we have listed on our page and marked as the best business FX services).

Business FX is largely derived into four main functions:

We’ll explore each of these four business foreign exchange functions in more detail below.

Which Businesses Save Most Money by Using an FX Service?

Here are a few examples of the type of businesses which can benefit, and save money, by using a specialist for their foreign exchange business payments, management and currency hedging.

• Businesses which are making a big purchase abroad (or are being purchased in foreign currency)
• Businesses owned by multinationals with multiple bank accounts
• Businesses that have suppliers abroad
• Businesses that have employees abroad (to use for Global Payrolls)
• Businesses that get paid in foreign currency
• Businesses whose profits are impacted by foreign currency movements and wish to mitigate that
• Businesses that need to pay a commitment in foreign currency (instalments or one-off payment in the future)
• Businesses with property abroad / mortgages abroad
• Franchise stores with branches abroad
• Online stores and private sellers
• Sport clubs
• NGOs

Do I need to Use a Foreign Exchange Service?

Here are some of the more common reasons that businesses will utilise a foreign exchange service:

• Make one-off business payments overseas, exchange your base currency to the currency you need, while being able to avoid a SWIFT transfer (meaning it gets there quicker and easier).
• Make transfers to suppliers, providers, employees, affiliated companies or any other b2b overseas payment – online or via phone.
• Do payroll payments in an automated or non-automated manner.
• Hedge currency risk by offering sophisticated FX hedging derivatives (most importantly a Currency Forward Contract).
• Get guidance about the best timing to make large currency exchanges for your business.
• Make invoicing international clients smoother and cheaper with the use of international bank accounts.

In a post-COVID globalised society, there are many SMEs who can use a business foreign exchange service, as well as corporations who can benefit from the lower rates and dedicated guidance in corporate foreign exchange.

Even the smallest business, as long as it has suppliers, employees, or business partners abroad – can benefit from using a dedicated foreign exchange service by avoiding the cumbersomes and archaic processes that banks still encompass within their international business payments experience.

In fact, the majority of the UK currency brokerage services started off as strictly corporate-facing and have expanded over time into smaller businesses and private clients, understanding that the service gap and dissatisfaction with traditional high-street banking can appeal to more than just corporate customers.

For corporations, the value add versus traditional banks is easy to comprehend and convey.

Some banks, even customer-centric banks like Virgin Money, will not provide you with your own dedicated account manager who will take the time to understand your business, conduct a currency audit and build a tailored hedging strategy.

Most banks are set up in such a way that unless your corporation is big enough to meet the requirements to have direct access to the FX trading floor, you are likely to be serviced by a banker rather than an FX specialist or a corporate FX dealer.

This means you are going to have far less guidance than with specialised business FX services, and not have access to FX hedging tools. And even if you do access a currency dealing team, you won’t necessarily get a dedicated account manager who will get to know the ins and outs of your business. Specialised brokerages offer a full FX risk management service, complete with a dedicated account manager.

Corporations which are looking specifically at recruiting abroad and need more of a comprehensive solution like a global Employer of Record / PEO will not find that with any of the business foreign exchange specialists listed on this page – they deal (and are regulated to deal) only with payments.

For small businesses, one of the primary motivators is to minimise costs.

Getting a more favourable exchange rate (in addition to guidance and hedging tools which may improve the timing of your trade)) is pivotal and can have a serious impact on the amount you set to gain or lose.

If you look at our best foreign exchange rate comparison you’ll see how WorldFirst rates move between margins of 0.15% and 0.75% of each transaction without any transfer fee, whereas Natwest Bank, Lloyd’s, or even challenger bank Monese, would be significantly more expensive. Virgin Bank takes a 2.5% fee off each transaction below £25,000.

For online sellers, one of the key components of doing business internationally is usually multi-currency accounts in order to receive payments from international marketplaces. Supplied by the best business FX providers, such USD accounts, EUR accounts, JPY accounts or AUD accounts (and more!) are made available to qualified businesses and sole-traders who sell online. What’s more, these international accounts often allow for LOCAL TRANSFERS to both make and receive payments in-country and avoid expensive international fees.

Using these providers means you don’t have to receive payments from partners like Amazon or eBay through their own highly expensive currency exchange payment programme (Amazon can charge 4% on currency exchanges, PayPal can charge close to 5%).

How to Choose a Business Foreign Exchange Specialist?

There are many options in the market for business currency services.

We have covered 47 of those, to date.

Not including online payment processing gateways.

How to Analyse a Corporate FX Offering?📋

Divining Into the Various Functions of Corporate FX Services

Foreign exchange for business can be categorised into four main functions.

Namely; Deliverable FX, FX Risk Management, Cash Management (Multi-currency Accounts) and International Payroll.

Get each of these right and it goes a long way to ensuring a smooth ride for international businesses.

Some international corporations will need to find foreign exchange solutions across all four categories, whilst others may only need to focus on one.

It all depends on the scale of international operations and the individual requirements of the business.

Though it is oftentimes most convenient to have one provider for all of these functions, a number of businesses choose to work different providers for different requirements.

Throughout our analysis,we’ll look at foreign exchange providers which are a solid bet for all of these functions, and those who specialise in a particular niche.

Deliverable FX

Deliverable FX relates to the payment aspect of currency exchange.

In the delivery of a cross currency transfer, two currencies are exchanged and there is a physical settlement that takes place, either between a company’s own accounts or from the sender to the receiver.

It is in the movement of currency from one account to another in which every provider reviewed here on MoneyTransferComparison can help.

Deliverable FX has nothing to do with investment based forex trading which is for speculative purposes.

The most pressing matters when it comes to sending international wires are; speed, safety and cost.

Companies will know the importance of paying their suppliers on time and a reliable foreign exchange partner is vital to making this happen.

For payments to arrive fast and on time, we recommend larger specialist FX companies. This is due to two main factors: a) they have tremendous feedback and a strong reputation for doing exactly this and b) they tend to have an extensive global footprint which allows them to make use of various payment networks to deliver faster payments (more on this in our boutique vs large corporate FX brokers comparison at the foot of this guide).

Spot FX transfers (i.e. transfers settled ‘on the spot’) are the most common way to pay suppliers but forward contracts are another option which allow you to lock in today’s rate for the future.

In some instances, it might be worth establishing repeat transfers if your business has regular payments to make, such as overseas rent or overseas utility bills.

Whether it’s your hard-earned money as the owner of the business or your role is to manage the company’s finances, you’ll want to be absolutely sure you’ve taken all required steps to ensure the safety of the transfer too.

The provider you opt for must be FCA authorised and regulated in the UK or have the equivalent authorisation in the countries they operate.

The payment provider you choose will also determine the amount you have to pay in transfer fees and the exchange rate margin. Whilst having a proactive currency strategy is important, there are ultimately unknown factors which will influence the exchange rate in the future.

The one direct influence you have as a business owner or financial controller with regards to how much you have to pay for an international transfer is in the payment provider you choose and the payment terms you negotiate.

Based on client feedback, Currencies Direct (rated 4.9 / 5 on TrustPilot) has the strongest reputation for successfully moving money across borders.

Business FX Risk Management

A main task for a firm is to minimise risks that are not necessary for the performance of the business. Among the different types of risk lies a very important one that can jeopardise the financial health of any global company: Foreign Exchange Risk.

As currencies fluctuate and as markets increase in volatility, it becomes very difficult to predict the future and gain stability in terms of inflows and outflows.

For this reason, more and more companies are hedging their future cash flows and stabilising the rate at which they will exchange currencies in the future.

Any business that trades internationally should understand how FX hedging works (and who can use it) and drill down into one particular hedging tool that is essential in a business corporate/SME foreign exchange strategy: the currency (FX) forward, which enables businesses to lock current exchange rates for the future and mitigate related FX risk.

Don’t worry though; if you aren’t into understanding the technical aspects of business FX strategy, our top-rated business payment specialists also offer a fully managed fx treasury management service.

Four of the more ‘vanilla’ hedging instruments are:

Through our research, boutique currency broker Fiscal FX provides forward contracts for business clients with the longest duration. In some instances, Currency Forwards can be taken out with a maturity date of up to five years in the future.

Cash Management / Multi-Currency Accounts

Cash Management refers to the process of managing the cash inflows and outflows of your business.

From an international perspective, it’s managing funds across different countries and currencies, ensuring that funds are distributed in the correct part of the world as and when it is needed to, whilst simultaneously ensuring that your money is working as hard as possible for you in the process.

To do this, you need clear visibility into your accounts and you need cash management solutions that maximise access to funds in different local and regional markets, and importantly, in multiple currencies.

A crucial element of international cash management is the use of multi-currency bank accounts.

These accounts can be provided by a bank or fintech and allow the holder to spend, receive, and hold multiple currencies across the world.

This flexibility simplifies transactions, reduces costs, and aids finance managers in tracking cash flow, making them especially beneficial for businesses with extensive international operations or SMEs that trade internationally.

One of the primary advantages of multi-currency accounts is that they eliminate the need to convert foreign currency collections and payments to the home currency, thereby reducing the risk of potential losses due to fluctuating exchange rates and the expensive FX fees that come with currency conversion.

Having receivables and payables denominated in the same foreign currency creates what is known as a ‘natural currency hedge’.

Banks tend to require you to have a local business, with a local address in order to open bank accounts in a certain country.

This results in expensive setup costs, arduous applications and the need to work with a significant number of banking partners around the world.

One of the biggest advantages of fintech multi-currency accounts is that businesses can streamline their international transactions, avoiding the complexity of dealing with multiple banks in different countries, which can pose challenges in tracking money and leveraging favourable exchange rates.

WorldFirst is renowned for having what is generally accepted as the best multi currency account solution for business on the market – offering in-country, local currency accounts in GBP, USD, CAD, AUD, CNH, EUR, HKD, JPY, NZD and SGD, plus extra multi-currency accounts in CHF, PLN, SEK and AED.

Global Payroll

International payroll pertains to the process of managing and executing employee payments across multiple countries.

First of all, it involves understanding and complying with the complex tax laws, labour laws, and statutory regulations of each respective country. A range of solutions and services exist to streamline and simplify these operations, but you need a dedicated global payroll solution like Papaya Global.

Once the correct legal framework has been established, it’s a case of physically getting the money to your employees across the globe. International money transfer firms do not provide legal and HR solutions – they provide specific help with currency exchange and salary transfers to different countries.

For larger businesses, one of the most important payment solutions for salary payments is the ability to automatically upload a batch of payments in one go.

Large corporate FX brokers like Currencies Direct and moneycorp allow customers to upload thousands of payments in one click, drastically reducing the manual labour required to set up international transfers for multiple salary transfers.

Other important solutions for payroll include the ability to schedule repeat transfers, which can automatically execute at regular intervals, and multi-currency accounts, which reduce the need for currency exchange.

Small Business Foreign Exchange Surveys

Key findings from a UK-facing survey conducted by WorldFirst, one of the UK’s best rated foreign exchange companies for business, are available below.

The survey found that:

Few SMEs are Using Currency Forwards and Options Contracts

Research from East & Partners demonstrates the link between the size of the business and their tendency to utilise FX forwards and currency options. Micro businesses are less likely to use options than SMEs, who, in turn, are less likely to use options that small corporations.

One of the big advantages of working with a dedicated business FX broker is that they make a range of foreign exchange instruments available to SMEs. The type of instruments that banks only make available to large corporations. Just because a business is smaller in size, it shouldn’t mean they’re unable to access hedging instruments that can help to protect against exchange rate risk. As always, caution should be taken ahead of agreeing to a foreign exchange option and customers should be 100% aware of the legally binding contract they sign.

MTC Research: Smaller Businesses Less Likely to Check FX Costs

Research conducted with a pool of 250 SMEs by us here at MoneyTransferComparison found small businesses were less likely to be aware of their FX costs and less likely to shop around for a better FX rate.

Nearly half of all businesses surveyed with between 1-10 employees make international transfers without even checking the FX rate. Of those that do, there was a greater majority that would then go on to shop around for the best rate available.

Businesses with between 11-50 employees were more likely to check rates, but 42% of respondents in this category still wouldn’t shop around for the best rate.

As one would expect, the greater the size of the company, the more likely they were to shop around for the best rate.

57% of all respondents with 51-200 employees shop around for the best exchange rate and 58% of all respondents with 200% employees shop around for the best exchange rate.

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