How and why the service you currently use for pound to rand is not your best ption
You’re almost certainly losing money that should be in your pocket or on your bank balance each and every time you make a pound to rand transfer of any significant value. It’s not your fault – the foreign exchange and transfer market is opaque despite the fact new specialist fintech platforms have improved things. But most of these services, especially the best known, are retail market facing. If you are making a pound to rand transfer worth a few hundred pounds, they can be great. You can stop reading right now.
But if you are transferring thousands or especially tens to hundreds to thousands through a pound to rand transfer they certainly do not offer the optimal exchange rate and fees combination. You can probably still save hundreds to thousands on each significant pound to rand transfer you make. And if you are using your bank then the chances are you could be saving far more still. Even the retail facing comparison sites you might use to find what looks to be the best pound to rand exchange rate available isn’t. And for larger transfers, especially if you make them regularly for business or personal reasons, even small differences in the pound to rand rate really add up.
That has been the case even more than usual over the past couple of years. Brexit has led to significant volatility in the traditionally stable pound exchange rate and the same can be said for the effect of emerging markets turbulence on the rand. Both currencies have become lightning rods for unstable geo-political developments on opposite sides of the world.
Thankfully, while too many of the individuals and businesses who make pound to rand exchange and transfer transactions are not aware of the specialist options available to them, there are such options. And they can save you a fortune. So let’s take a look at what the common pound to rand mistakes you are probably making cost you and the cost difference when compared the best pound to rand exchange rates and transfer fees available.
Common Mistakes When Securing The Best Pound to Rand Exchange Rate For a Business
When you have to make a pound to rand currency exchange transfer, there is a high likelihood you use on of the following options:
All three will hurt you in the pocket or balance sheet compared to the pound to rand exchange rate you could and should be getting for either major individual transfers or regular business transactions. Let’s take a closer look at how.
At the time of writing, late November 2018, the pound to rand spot rate is £1:R17.4125. I will probably be different to a greater or lesser extent at the time you read this but the example in its relation to the pound to rand exchange and transfer services open to you will almost certainly be much the same. Let’s see how much the pound to rand exchange rate and fees you currently get are costing you.
Will Your Bank Offer The Best Pound to Rand Exchange Rate?
Simply and directly put, no. Rather, the pound to rand exchange rate you will get from your bank is probably the worst offer you’ll encounter that isn’t from some shady bloke in the pub or on a street corner. Or an airport exchange bureau… And not only is the pound to rand exchange rate you’ll get from a bank almost certainly some shade of terrible but the additional transfer fees are also likely to be high.
The above table is published by Halifax, one of the largest 4 retail-facing UK banks by market share. If you were to make a £75,000 pound to rand transfer you would pay 2.4% (as an ‘exotic’ currency the rand will almost always come in at or near the top end of the scale) Halifax will charge you 2.4%, or thereabouts, on top of the spot rate of £1:R17.4125.
This means exchanging £75,000 to rand (ZAR) via Halifax today would cost you 2.4% on top of the spot rate. So your pound to rand exchange rate would be £1:R16.995.
£75,000 at the spot pound to rand exchange rate of £1:R17.4125 = R1,305,937.5
£75,000 at the Halifax euro exchange rate of around £1:R16.995 = R1,274,625
The total cost of the pound to rand exchange rate offered by the bank costs you R31,312.5 or £1798.72 on a £75,000 transfer. That’s a lot of money.
Will A Fintech Offer The Best Pound to Rand Exchange Rate?
The new wave of fintech platforms specialising in currency exchange and transfer services has undoubtedly been a positive for anyone who needs to make pound to rand transfers. I’m not talking about e-commerce focused payment services providers and digital wallets like Paypal and Stripe. With exchange rates that are even worse than those of banks (Paypal adds 2.5% to the rate it gets from its bank) making any kind of major, or even minor, pound to rand transfer via such services should be avoided at all cost. However, there are other fintech platforms which, under the right conditions, do offer a very well-priced pound to rand exchange and transfer service.
Prominent examples of these specialist fintech services include TransferWise and Revolut, though there are others which are comparable. As well as offering a better user experience, fintech platforms will give you a strong pound to rand exchange rate. However, as good as platforms such as TransferWise are for smaller pound to rand transactions, they are not your best option for larger sums. Let’s take a closer look.
TransferWise offers a pound to rand exchange rate of £1:R17.41940. Compared to the spot rate of £1:R17.4125 that’s a total cost of just R517.5 or just £29.71. However, TransferWise also charges a flat fee which, at its lowest for larger pound to rand transactions adds up to another £493.29 taking the total cost of the transfer to £523. Your £75,000 buys you a total of R1,297,862.18 when all charges are accounted for.
The way fintech currency exchange platforms like TransferWise work is that they match the inverse exchanges and transfers being made different users. This means that they almost always have the currency they need locally and can avoid going through banks for exchange rates and transfers are at local bank to bank rate. It’s an excellent service and system but primarily targeted at the retail market and built for smaller value transactions. A flat fee like 0.66% makes only a small difference when a making a pound to rand transfer worth a few hundred. However, once into the tens of thousands it adds up.
This means that if you are a business or even individual user making a larger transfer, fintechs will not offer the best euro exchange rate. At least not once additional fees are also taken into account. On the other hand, for smaller transfers, TransferWise, Revolut and the other currency transfer specialist fintechs should probably be your choice for the best euro exchange rate.
So for businesses or individuals make larger pound to rand transactions, specialist retail-facing currency exchange and transfer fintech platforms will not optimise your costs.
Will A Retail Comparison Site Offer The Best Pound to Rand Exchange Rate?
Most comparison sites the usual Google search terms will throw up are also not where you’ll find the best pound to rand offers for transactions of significant value. The tend to be either targeted at holidaymakers or the kind of smaller retail transactions that the new breed of fintech platforms are good for. The screenshot below shows results from one of the top ranked currency exchange and transfer comparison site for numerous terms, including ‘best pound to rand exchange rate’.
At 17.412 the exchange rate isn’t bad and the recipient will receive R1,305,914 for the £75,000, which is actually better than the R1,297,862.18 TransferWise offers. We’re getting closer. But you can still do better!
How Will Offer The Best Pound to Rand Exchange Rate For Business Transfers?
So what kind of service can you use to secure the best pound to rand rate available on the market for larger and business transactions? The best rates for this kind of exchange and transfer will almost always be found via specialist currency exchange and transfer brokers that deal exclusively with larger personal and business transactions that have a starting value in the thousands of pounds. And not only will the base, advertised pound to rand exchange rate offered by this kind of broker almost always beat those you will find anywhere else but if you make regular transactions your account manager will usually be able to reduce it even further for you.
And not only will you secure the most advantageous exchange rates, you’ll also have access to specialist currency risk management contracts that can potentially save you a fortune in your pound to rand exchanges over the longer term.
The screenshot below shows our best offers for the same £75,000 transfer we examined the costs of through less specialised services.
The top exchange rate offered is £1:R17.419, an improvement on the £1:R17.412 that can be found through a more retail-focused comparison site. The transaction buys R1,306,425 compared to R1,305,914. A saving of a little over £29 at the base exchange rate you will be able to reduce further if you make regular transfers.
Is The Best Pound to Rand Exchange Rate The Only Benefit A Specialist Broker Offers?
No, there’s more. As well as offering you the best pound to rand exchange rate on larger and business foreign exchange transfers, business exchange specialist brokers also offer a range of currency risk management services. For anyone or business that makes regular large transaction, or at times of particular volatility for the pound or rand, like now, it is these risk management contracts that can really reduce your pound to rand exchange costs.
GBP/ZAR – November 2018
The chart above shows the movement of the pound to rand exchange rate over November 2018. On November 13th, the exchange rate was £1:R18.83478. By the 16thit was £1:R17.92531 and by the 22nd, £1:R17.70460. At the spot rate, the same £75,000 transfer would have bought R1,412,608.5 on the 13th, R1,344,398.25 on the 16thand R1,327,845 on the 22nd.
That translates to a cost difference of R84, 763.5 or around £4850 between 13th and 22nd of November. Between November 13th and November 16th, that difference is still £3905.
Pound to rand exchange rate turbulence would have cost you £3905 in just 3 days! And £4850 over 9 days!
That is why it is so important to have the kind of specialist currency risk management contracts that business currency exchange and transfer brokers offer. The two main contracts that can help you avoid significant losses if the exchange rate moves against you between the time you know you need to make a pound to rand transfer and you actually having to do so are:
Forward Contracts: this kind of currency risk management contract lets you lock in the best pound to rand exchange rate ahead of a transfer you know you will have to make in coming weeks or months. A pound to rand exchange rate, plus a small premium, is offered based on the current market rates and is secured with a deposit. So if the pound’s strength against the rand weakens over the intervening period until you actually have to make your transfer, it will not affect you. You’ve already locked in the best euro exchange rate based on current conditions.
Limit Order/Stop Loss Contracts: these currency risk management contracts allow you to target the best euro exchange rate you believe is the realistic optimal up until the deadline by which you have to make your business transfer. A Limit Order targets the top end of the market and a Stop Loss the lower end. You, usually with advice from your account manager, will set a target euro exchange rate and your exchange will be made the moment the exchange rate improves and the market hits that target. Or if the exchange rate turns in the wrong direction, a Stop Loss order will mean your exchange is automatically made before the situation deteriorates further.
By using these additional services smartly, you will be able to make additional savings on those you will have already made by choosing the specialist broker that can offer you the best pound to rand exchange rate and fees ratio.
So, stop losing money on your euro transfers or make sure you don’t if you have a sizeable one-off pound to rand transaction to make. Get in touch and get the best exchange rate, the best fees and the best currency risk management facilities!