Discover the main challenges of FX payments, from high transaction costs and settlement risk to compliance complexity and currency volatility.
Universal Partners London is an award-winning payment specialist UK, redefining the finance industry through intelligent, client-led solutions. Driven by advanced technology, deep market expertise and a commitment to real partnership, we design solutions around your business ambitions to keep you moving forward.
Our services include mass FX payments, spot payment transactions, payment hedging, asset finance, invoice finance and international currency exchange, enabling us to serve as a complete finance solutions company. As a trusted FX provider London and payment solutions company, we enable businesses to boost bottom-line profits and reach new heights in the future.
Foreign exchange (FX) payments are cross-border payments/transactions that involve currency conversion. Using FX payments is not without its challenges – they come with several operational, financial, and regulatory challenges. But if you’re aware of the following challenges and take our advice, you’ll minimise their impact on your operations.
High Transaction Costs
FX payments often include spread between buy/sell rates, bank fees and intermediary/correspondent bank charges. For businesses using a foreign exchange company, FX broker, or FX provider in London, these costs can quickly reduce margins, especially on small or frequent mass FX payments. Some payment solutions companies and currency brokers can also make pricing unclear, with hidden charges buried in spot payment transactions money.
While some FX solutions companies clearly list fees for some spot contract methods like wire transfers, you might still be surprised by the exchange rate they offer.
As you’re trying out different FX payment methods to transfer money broad, make a guess about how much it will cost based on the advertised fees and exchange rates. If the actual cost is higher, there’s a chance you’re being hit with some hidden costs.
Settlement Risk
One party delivers the currency but does not receive the other due to a counterparty failure or delay which can lead to loss of principal, especially in different time zones or with non-real-time settlements.
Operational Inefficiencies
Manual processes, legacy banking systems, and multiple intermediaries leads to delays, errors, and high reconciliation workload. Businesses relying on invoice finance, asset finance, or finance solutions companies often face added friction without streamlined automation.
Regulatory and Compliance Complexity
Varying regulations on capital controls, documentation, and anti-money laundering (AML) requirements means slower processing, rejected payments, or legal exposure if not properly managed.
Sending money overseas is like stepping into a whole new world of rules and regulations. You’ll need to know how to report your expenses and revenues, but you’ll also need to keep track of all the documentation you’re required to provide and keep. It’s a good idea to chat with an accountant before you start processing FX payments. Payment specialists UK-wide can help you understand your responsibilities and considerations. Keep a clear paper trail for all your payments, including any purchase orders, invoices, receipts, and communication. This will be helpful if there are any errors that need to be fixed or if an audit takes place.
Lack of Transparency
Not all FX brokers or forex traders provide full transparency. Payers often don’t see the full breakdown of fees or exchange rate margins which make it difficult to assess whether you’re getting cheap exchange rates or paying hidden costs.
Cybersecurity and Fraud
Cross border payments and forex trading/FX transactions can be targeted for phishing, spoofing, or account hijacking leading to financial losses and reputational damage.
Exchange Rate Volatility
Currency values go up and down all the time, which can mess with how much you get or pay. You might make a great deal one day, but by the time you’re ready to pay, the exchange rate might have changed, and you’ll lose out. This can be a problem for businesses that deal with foreign money, especially if it takes a while to process the payment. And even if the payment finally gets to the other person’s bank account, it might cost you more than you thought.
Payment hedging companies often use forward contracts or swaps to lock in rates. Businesses might not get a better deal if the exchange rate goes up, but they won’t be surprised if it goes down and they end up paying more.
Intermediary Risk
FX payments often pass through multiple correspondent banks. Each intermediary may introduce delays, extra fees, or even freeze funds if compliance flags arise. Working with a reliable FX broker, payment solutions company, or finance solutions company reduces these risks and ensures smoother settlements.
With the current volatility, contacting a currency specialist will allow you to safeguard your business and finances by planning ahead. If you are a business transferring funds overseas, get in touch with Universal Partners and our dedicated team to discuss the latest market movements ahead of your currency exchange. Universal Partners FX can provide invaluable help on efficient risk management, payment and finance tailored solutions to your business’ transfer needs.
