What is mid-market exchange rate?

You are a business owner. Or perhaps you are in the Accounts Department. Regardless of your position, a common question faced is “What is the best way to pay my international suppliers?” There are a lot of choices you can pick from – banks, traditional remittance houses (TRH), Fintech firms and more.

While reading up more about the different choices and what they have to offer, you might come across unfamiliar terms. For example: “Mid-market exchange rate”. What is it? Why does a mid-market exchange rate seem to be always more attractive?

Through this article, Opal hopes to provide you with a clearer picture to help with your next cross-border money transfer.

What is a mid-market exchange rate?

A mid-market exchange rate (also known as the “interbank rate”) is calculated as the midpoint between the buy and sell prices of two currencies. In simpler terms, it is the average of the price the buyer is prepared to pay and the price the seller is prepared to sell for.

A simple illustration example – If the buy rate of a currency pair is 1 and the sell rate of the same pair is 2, the mid-market rate will be the average which is 1.5.

Who uses Mid-market exchange rates?

The mid-market exchange rate is the rate that you find when you search on public currency providers like Google and Reuters. It is universally regarded as the most transparent and the “real” exchange rate at any given moment as it reflects real-time movements in the currency markets.­­

These rates are mostly used between banks and financial institutions when they trade amongst themselves. As a business, it is almost impossible to access those rates because banks always apply a ‘spread’ – a profit margin for themselves.

Where can I send money using the mid-market rates?

Unfortunately, as a business, you will not have access to mid-market rates. Banks and financial institutions habitually mark up the exchange rate by applying a margin or spread to it, so that they can profit from international money transfers.

For example, if you are exchanging Singapore Dollars for the Chinese Yuan, the mid-market exchange rate should give you 4.80 Yuan for every dollar. However, the banks and currency exchange providers might offer you 4.50 yuan instead. While this difference of 0.30 Yuan may seem small, it can add up to a whopping total of 3000 Yuan if you exchange 10,000 SGD! That is a 3000 Yuan loss from what your beneficiaries are supposed to receive if the mid-market rate is used.

For businesses that make regular international money payments, it is crucial to transfer money at a rate as close to the mid-market exchange rate as possible to ensure you get more of every dollar you send.

Opal’s services and product offerings

Opal focuses on making finance smarter, more accessible, and more transparent for all businesses. Hence, we peg our rates as closely as possible to the mid-market rate for our APAC & SEA currency pairs so that you can save on your international money transfers. We are always transparent in our rates and FX margins, with the indicative FX rate shown on the transaction page when you are making your transfers. We are especially competitive for our Chinese Yuan (CNY) and Malaysian Ringgit (MYR) currency pairs, where we offer FX rates that are higher than mid-market rates, so your beneficiaries can receive more.

On top of competitive and transparent exchange rates, we also waive fees for the opening and maintenance of an Opal account. While other providers might offset their competitive FX rates by hiking up other fees associated with money transfer, we provide $0 fees and only charge you based on our transparent, low FX margin.

By using an Opal account, your money transfers will be up to 40% cheaper than at banks.