If your company trades foreign exchange — whether for payroll, supplier payments, or hedging — there is a good chance you have never independently benchmarked what you are paying. Most mid-market companies rely on one or two bank relationships and accept the rates they are given. The cost of this inertia can be significant.
The hidden cost of loyalty
Banks and brokers price FX with a spread — the difference between the interbank rate and the rate you receive. This spread varies widely depending on the provider, the currency pair, the deal size, and how much competitive pressure exists. Without benchmarking, you have no way of knowing whether your spread is 5 basis points or 50.
For a company converting £10 million per year, the difference between a tight spread and a wide one can be £30,000–£100,000 annually. That is margin, not overhead.
What good benchmarking looks like
Effective benchmarking is not about getting three quotes and picking the cheapest. It is a structured process that evaluates pricing, service, platform capability, and counterparty risk.
Pricing transparency
Request indicative pricing on your most common currency pairs and deal sizes. Compare these against the interbank mid-rate at the same timestamp. The difference is your all-in cost. Do this across multiple providers on the same day for a true comparison.
Service and execution quality
Price is not everything. Execution speed, platform reliability, reporting quality, and the availability of a named dealer all matter — particularly for larger or more complex trades.
Counterparty risk
Who holds your margin? What happens if the provider fails? Understanding the regulatory status and financial strength of your counterparty is essential, particularly for forward contracts where settlement may be months away.
Product range
Does the provider offer the instruments you need — spot, forwards, options, structured products? If your hedging programme evolves, can the provider grow with you?
At minimum, every two to three years — or whenever you experience a significant change in FX volumes, enter new currency pairs, or feel that service levels have declined.
The value of independence
Internal benchmarking is useful, but it has limits. An independent review — conducted by someone who understands interbank pricing, market conventions, and the competitive landscape — will identify gaps that internal teams may not see, particularly if the same provider relationship has been in place for years.