A new report says that less than 10 percent of South African businesses receive fair forex charges. This is shocking, especially in the world of international business, forex transactions are the lifeblood that keeps the global economy alive with an estimated daily volume of $7.6 trillion as of April this year. The South African chunk of that amounts to over $19.1 billion.
Local businesses rely on these transactions to navigate the complex world of international trade. However, a recent survey conducted by South African fintech disruptor Future Forex revealed a startling truth – many of these entities partaking in international money transfers are unknowingly taking a significant knock on their bottom-line due to non-transparent forex fees.
Exposing Lack of Transparency
The Future Forex survey, compiled from over 250 company responses across various industries, exposed a concerning lack of transparency and fairness in pricing when it comes to forex transactions. It found that 92.8% of respondents were either in the dark about how their banks or forex providers were charging them for each transaction, or were being significantly overcharged on their transactions.
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The lack of transparency by banks and other forex providers was particularly alarming, with more than 75% of respondents being unaware of what they’re being charged each time they perform a cross-border transaction.
This murkiness extends to the exchange rate margin, with 34% of participants not knowing about this critical aspect of forex dealings, which is the lion’s share of the fees charged by a provider.
Harry Scherzer, CEO of Future Forex says: “This seemingly innocuous detail can actually have profound financial implications for businesses, who in turn are likely to be facing higher costs than they are aware of.” adding, “The exchange rate margin, often referred to as the spread, is the gap between the rate at which a forex service provider buys a currency and the rate at which it sells it.”
He further explains that when sending R1 million to the USA and converting that amount to dollars, using a spot rate (current exchange rate) of R19 to $1, a bank might charge the sender R19.38 for each dollar bought. Therefore, the spread in this case would be R0.38 per dollar, or 2% of the transaction value. You will be incurring a cost to the sum of approximately R20 000 for this transaction – excluding processing and admin fees.
According to Scherzers insights, exporters and importers are the backbone of South Africa’s international trade, and bear the brunt of these hidden costs. A small discrepancy or hidden cost in each transaction, when multiplied by sheer volume, can result in significant, and often unjustified fees.
In the world of international business, forex transactions are the lifeblood that keeps the global economy alive with an estimated daily volume of $7.6 trillion as of April this year. The South African chunk of that amounts to over $19.1 billion.
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Scherzer affirms that Future Forex is poised to fill this gap stating, “Future Forex is poised to fill this gap, leading the charge for transparent, client-centric forex services.” The firm will also be leveraging automation, technology, and support to offer South African businesses the best possible forex rates.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry