All the various terms regarding “rates” makes the process of exchanging and sending money far more complicated and confusing than it needs to be. Unfamiliarity with the terms also increases your chance of falling victim to marked-up exchange rates, which means you would be losing a portion of the money you fund for your transaction.
In the following sections, we’ll review the meanings of mid-market, interbank, real, and marked-up rates, as well as explore how the rates apply to currency transfer customers.
Banks and other foreign exchange brokers are buying and selling currencies 24/7 in the foreign exchange market. On this platform, traders are offering buy and sell prices of the currency they want and the currency they have. The mid-market rate reflects the midpoint between the demand and supply for each respective currency exchange.
For example, if party A wants to sell 1 CAD for 2 Euros, but Part B wants to sell 1 CAD for 1.5 Euros, the mid-market rate would settle in between to 1 CAD for 1.75 Euros. This of course is a very simplified representation of how the exchange market works, but essentially illustrates how the exchange market and mid-market rates work.
The mid-market rate fluctuations in real time in accordance with changes in the currency market, and thus is always fluid. It’s also the best possible exchange rate, as it is derived directly from the platform on which global foreign currency exchange occurs.
The interbank rate is an interchangeable term for the mid-market rate.
The mid-market rate is the real exchange rate because it’s the actual point between the buy and sell prices in the real foreign exchange market. The mid-market or interbank rate is considered to be the fairest rate possible.
Although there exists the real exchange rate in the market that is used by big financial enterprises, the average consumer unfortunately does not have access to the same market for their everyday money transfers. Instead, they must go through banks and other money operators to exchange currency.
These financial services typically add a mark-up to their rates, hence “marked-up rates,” give the customer less than what they should be getting for their exchange, so that they may profit from the margin. They may even boast about their “low fees,” but compensate through their inflated exchange rate. Because they do this so discreetly, the customer is often unaware of how much extra they are paying above the real exchange rate for their money transfer.
VoPay creates a bridge to close the aforementioned gap between the customer and the foreign exchange market. We enable customers to obtain the same benefits and interbank rates for their small-scale transactions that the bigger financial entities have for their transactions of billions of dollars. Through us, customers are able to receive the real exchange rates as well as transfer their money quickly and safely. We help you save money when you send money!
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