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Fintech: The real potential in foreign currency transfers

In the industry, foreign currency transfers are part of daily business. So far, the high fees and exchange rate surcharges of the banks are hardly questioned. But now there are cost-effective and secure alternatives: Fintechs offer better conditions, transparent exchange rates and are – as BaFin-regulated – as safe as banks. A comparison that can be financially rewarding for industrial companies.

The industry in Germany is booming. Foreign trade has shown impressive growth rates in recent years. It is well-known that in Germany in particular, more and more companies from the electrical, metalworking, automotive and chemical industries are internationalizing their production and relying on foreign inputs, which are often bought in China, the USA, Eastern Europe or other countries in the world become. These components, as well as production site employees, must be paid in the Chinese Renminbi Yuan (CNY), the US Dollar (USD) or other foreign currency.

Companies usually make their foreign transfers through their bank. The industry has hardly questioned this routine so far. However, there were virtually no alternatives to the offer of financial institutions. And because of that, the fees and foreign exchange spreads are high when you transfer money in foreign currencies. If you are looking for a bank with more favorable conditions, it is also difficult to get an overview of the charging jungle. The Frankfurter Allgemeine Zeitung recently came to this conclusion: “Anyone who wants to find out about the total costs incurred before making a foreign transfer often fails because of the complicated and non-transparent breakdown. While almost all providers quote a flat-rate transfer fee, it is not clear to customers how much they pay to calculate the exchange rate and, more importantly, how the sometimes large deviations from official reference rates occur. ”

Fees: four-digit versus seven euros flat rate

However, experts know how the fees and foreign exchange costs of foreign transfers are composed. Here’s an example: Company XY buys a part of its electrical components from China. The company pays the costs in twelve foreign transfers of EUR 200,000 each.

For each transfer from Euro to Yuan, the Bank will charge a fee of 1.5 per mil of the transaction amount. So 300 euros per 200,000 euro transfer and extrapolated to the year 3,600 euros. However, especially in industry, the transfer amounts are often significantly higher than the 200,000 euros of the example.

If the company were to purchase monthly electronic components amounting to one million euros, the percentage transfer fee for a transfer in the amount would be 1,500 euros. If there were twelve transfers at this level, then the fees would be extrapolated to 18,000 euros. Some banks, for example, cover the percentage fee at 300 euros per bank transfer, other banks do not. At significantly lower sums, usually up to 250 euros transfer fee, require the financial institutions a basic fee in the amount of ten to 15 euros. For higher amounts, the percentage fee depends on the amount of the transaction. Again, there is again a minimum charge of, for example, 15 euros.

Online services for foreign transfers offer, like the Frankfurt Fintech Giroxx, a fee of a flat rate of seven euros per transaction, regardless of the amount of the transfer. For the payment of his electrical components, the company would pay XY even if it transfers one million euros flat rate seven euros transfer fee. “We can make this cost-effective offer to the industry, because as a fintech we have a much leaner company structure. We do not need any branches and our online service is based on innovative technology that we use to work efficiently, “explains Klaus Hoffmann, one of the founders and managing directors of Giroxx. “Nevertheless service is capitalized with us. Companies that contact us with questions about their foreign currency transactions receive expert advice. ”

Foreign currencies: Hardly planning security for banks, transparency in online services

Further savings potential and planning security are offered by the online exchange rate services. This works as follows: The financial institutions work for foreign transfers with the so-called “fixed rates”. Who orders his transfer Monday afternoon at 14 o’clock over his on-line account with the bank, whose transfer is made on Tuesday at 13 o’clock to the “center settlement course” of the bank. This rate is determined once a day and applies to all transactions received since the last “fixing” the day before. Companies therefore have no planning certainty in their foreign transfers.

Online services provide transparency instead. Customers can even transfer to the live course here. With Giroxx, this is possible, for example, for selected currencies, if the transfer is made during business hours between eight and six o’clock. This offers companies significantly more planning security. Another way to reduce exchange rate risk is through the hedging transactions. For this purpose, companies today determine at what rate the foreign exchange is to be purchased at a later date.

Safety is the top priority

It may be financially worthwhile for industrial companies today to make foreign transfers via an online service. However, if you decide for a provider, you should definitely pay attention to safety. There are numerous, even international providers of alternative payment services. Often, however, it is not clear how they deal with the issue of security. So if you want to profit from the financial benefits, should make sure that the fintech is regulated by the BaFin banking supervision. Because only then does the provider meet the security standards that banks must maintain, for example, with regard to the protection of data and the security of money.

Published inFintech

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