In another of his series of articles explaining the ins and outs of foreign exchange and international payments for SMEs, Romeo Radman, Managing Director of Payments Etc, details how your options for buying and selling in other currencies have changed hugely in recent years.

Your first port of call if you needed foreign currency – usually for a holiday or business trip – used to be your local bank or post office.

As befitted those simpler times, you would hand over a sum in sterling – you could have used cash, a cheque, or, more rarely, a credit card – and you walked out of the branch with the currency in notes and coins or, if your trip involved visiting several countries, often travellers’ cheques.

If you ran a business, meanwhile, you usually had a word with your bank manager, and he would invariably sort the transfer for you, either arranging the cash transaction or sorting out the direct transfer of the funds to your business partner’s account.

What many businesses will never have realised is that the lack of alternative options for exchanging your money, or transferring sums overseas in other currencies, could have been hitting their bottom line.

Now though, a variety of new entrants into the arena have developed services specifically aimed at the many types of customer who need to transfer money in other currencies, and the variety of reasons why they need to do so.

The rapid evolution of payment services, in turn driven by the huge advances in technology in general, and systems for keeping transactions secure, even when they are completed without one of the parties being present, has led to business managers and SMEs getting used to dealing with both issuing and paying foreign currency invoices.

That demand has seen the emergence of a slew of independent businesses. Riding the wave of a series of regulatory changes as well as the earlier-mentioned technological advances, these concerns have brought a wider range of innovative products and solutions to the market.

Best of all, they often roundly beat the banks for the fees charged, the exchange rates offered, and the speed at which transactions can be completed.

Many independent currency brokers scale their charges in such a way that there is no initial commission fee to pay, and because of the more streamlined nature of their operations when compared to the bigger players, offer better exchange rates too.

There are now more than 1,200 dedicated independent currency exchange specialists, along with a trade body, the Association of UK Payment Institutions.

Overall control of businesses in the sector comes under the remit of the Financial Conduct Authority (FCA), while public feedback on a new directive on payment services, aimed at further increasing competition in the payments market, is currently being analysed by the government, with the intention that it will come into effect by mid-January 2018.

However, while the payment services they offer are regulated by the FCA, the actual provision of foreign currency exchange is not. So a money transfer to another business involving the changing of the amount involved from one currency into another does attract protection under FCA rules, the simple job of buying one currency with another does not.

But all payment institutions, whichever type of service they provide, now come under the jurisdiction of the Financial Ombudsman Service. This means that, for example, if you order a currency, it does not arrive, and the firm fails to rectify the situation to your satisfaction, you can ask the FOS to investigate.

In addition, the Association of UK Payment Institutions is the trade body set up to represent companies which process payments, whether in domestic or international currencies, and which are regulated by the Financial Conduct Authority.

At the time that the FCA assumed full control over the regulatory affairs of the sector, there were estimated to be 1,200 of these Payment Institutions operating under its aegis – that’s more than the number of similar businesses operating in all of the rest of the EU.

You should always, therefore, shop around before choosing a business with whom to partner for your foreign currency trading, especially if this is likely to be a regular business transaction.

www.paymentsetc.co.uk