All You Need to Know About the Mid-market Rate
If you’re involved in cross border trade, or regularly make or receive international payments, you need to know about the mid market rate.
Usually, when you look up exchange rates, you’ll see two options – the Buy rate and the Sell rate. The mid market rate lies in the middle of the buy and sell exchange rates (which is why it’s called the mid market rate). It’s the only real exchange rate, because it shows you the actual exchange rate between two currencies, without any extra fees or hidden overheads.
How Do I Know the Mid Market Exchange Rate?
Because the mid market rate is between the Buy and Sell rates, it keeps changing. You can work it out for yourself by splitting the difference between the buy and sell rates. The difference between the Buy and Sell rates is called the spread.
Here’s an example: Let’s say that your UK-based eCommerce business needs to pay £1000 to your suppliers in the Netherlands. You need to sell your GBP and buy Euros. Here’s how it works:
- Your currency exchange service tells you that the Sell rate is €1.10 for £1.
- The Buy rate for converting Euros into GBP is €1.30 for every £1.
- The spread is between €1.10 and €1.30 – a spread of €0.20.
- The Euro mid market rate lies between the two, so the mid market rate for GBP to EUR is £1 to €1.20.
Why Don’t Currency Traders Tell Me the Mid Market Exchange Rate?
If you’ve ever wondered how currency traders make their money, this is your answer: Currency traders take the live mid market rate and add extra fees and overheads without telling you. The Sell rate charges you more of the original currency to get a certain amount of foreign currency. The Buy rate gives you less of the foreign currency for the same amount of your original currency.
Why Does the Mid Market Rate Matter?
Unfortunately, very few international exchange services are transparent about their fees. Unless you can see all the fees involved in the transfer, knowing the mid market rate is the only way to tell if you’re getting a fair deal on your currency exchange.
An international payments service could be hiding all sorts of costs in their Buy or Sell price. If you know the mid market rate, you’ll know how much of a margin has been added onto the real exchange rate to disguise the trader’s extra fees.
Unlike other services available on the market, Payoneer believes in transparency and is working hard to raise awareness for the importance of mid market rate and hidden fees. When you register to your Payoneer account and use our services, we will provide you with the real exchange rate that applies to your transactions with no hidden fees.
Sign up for a Payoneer account and benefit from low fees with no hidden costs. A Let’s Talk Payments report found that Payoneer can save you up to 71% of the fees you pay through other payment options.