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What is the mid-market rate?
The mid-market rate, also known as the middle or interbank rate, can be defined as the midpoint at which banks trade currencies with one another. In other words, the mid-market exchange rate is the middle point between the price for buying and selling currencies at any given time, and is therefore naturally set by the market as it fluctuates.
Global forces, demand and supply, and economic influences will also influence the exchange rate between any given currency pair on an on-going basis, which is why the mid-market exchange rate is susceptible to change constantly. On average, however, most banks and other providers only change their exchange rate once a day.
Why does the mid-market rate matter?
The mid-market rate is the rate that banks buy and sell currencies with one another and is therefore seen as the fairest rate you can get. It’s the rate you’ll probably see if you look up the exchange rate for any two currencies on Google.
This rate should be the basis you use to compare the services offered by other money transfer providers and banks to determine whether you are getting a fair deal.
Additionally, the mid-market rate is also used by money transfer services to base their own exchange rate margins on. Generally speaking, it’s unlikely that you’ll find an exchange rate identical to the mid-market rate with a bank or money transfer provider. In most cases, the bank or financial services will use markups on the mid-market exchange rate as a charge for using their transfer service for your international transaction, and that rate will determine how much of the foreign currency you will receive after the money is transferred.
Sending money at the mid-market rate
Generally, it’s not possible to make an international transfer at the mid-market rate, as providers and banks will typically add a small percentage onto the current mid-market price as a fee for sending your money.
The exchange rate you are offered could be anywhere from 0.1 up to 8 or even 10% on top of the mid-market exchange rate, which can greatly affect how much money your recipient receives at the other end.
For this reason, researching your options is vital to make sure you find the best service for you, getting the maximum amount to your recipient rather than losing hundreds or even thousands in unfair exchange rates.
International transfer options
A few decades ago, there weren’t many options for people who wanted to transfer money abroad. When a person wanted to transfer money, the pricing for the few services that were available was opaque, and very expensive by today’s standards.
Nowadays, however, consumers have access to a wide range money transfer services that will use the mid-market price as the base for providing a fairer exchange rate and will process a transaction quickly. A SWIFT transfer (bank to bank) can take days to be approved, but some modern money transfer platforms can clear a transaction the same day.
With the gains in speed that modern money transfer platforms create, there has also been a substantial drop in transaction fees. Many money transfer platforms will offer their clients the mid-market rate or a markup of around 0.10 - 0.50%, plus a small fee for the service.
There is a lot more competition for international money transfers today, which means that you can get a much better deal when you need to move money to another country. It’s important to understand how international money transfer fees work, so you can get the best deal in the market.
Comparing Money Transfer Fees
With the rise in options for international money transfers, it can be difficult to get a fully unbiased view of the best option for your transfer needs. That’s where we come in.
Our MoneyTransfers.com comparison tool will compare exchange rates, fees, speed, payment options, and more in real-time, so you can find exactly the right provider for your transfer needs on the day you need to send money abroad.
Some platforms will set the exchange rate every day, while others will charge you mid-market price, plus a fee for its services. Regardless of the method used to determine the exchange rate, all the fees, as well as the total amount the recipient will receive should be displayed plainly when you start the process of your transfer - so this is a crucial element to look out for to avoid hidden charges.
Getting the Most for Your Money
Understanding what the mid-market exchange rate is will help you get more for your money when you make an international money transfer, but there are other things to think about as well. This include:
Receiving fees
Some banks will charge a fee to receive money from another country, even if it is being sent in the bank’s native currency. It’s therefore important to not only consider the exchange rate and transfer fees you are being charged, but any charges that may also be applied on the other end.
These fees can all affect how much your recipient ends up with, so are necessary to take into consideration if you are looking to send someone a certain figure.
Lock-in exchange rates
Another thing to consider is how often you will be making international transfers, as there are money transfer platforms that will allow you to lock-in a given exchange rate on a currency pair. Creating an international money transfer strategy should include some analysis of the frequency of your transfers, so you can best plan for your ongoing financial needs.
Bottom line
The question of what is mid-market rate can be answered as a term that you may come across every now and again when sending money abroad, and understanding this terminology and how it can affect your money transfer is crucial
The platforms that can move money internationally are making efforts to modernise and innovate their services all the time, so it’s a good idea to familiarize yourself with some of the better platforms in the industry. As increasing competition enters the marketplace, the best option you have for making international transfers could shift from one platform to another.
