What is foreign exchange risk? How currency moves hit your profits
By SendPay Business · · 2 min read
Foreign exchange risk is the chance that a change in exchange rates makes a payment in another currency worth less, or cost more, than you expected. Any business that buys or sells abroad faces it.
A simple example
A UK business invoices a US customer $13,000, due in 60 days. At GBP/USD 1.30 that's worth £10,000. If the rate moves to 1.35 by the time the money arrives, it's worth about £9,630, so the business has lost around £370 without doing anything wrong.
Ways to reduce it
- Invoice in your own currency where customers accept it.
- Hold money in the currency you'll need to spend, instead of converting back and forth.
- Convert when the payment arrives rather than leaving large balances exposed.
- Build a small margin into prices for currency moves.
Watch the rate you're given
On top of market moves, the rate a provider offers includes its spread. Comparing it with the mid-market rate shows how much the conversion itself is costing you.
Where SendPay fits
SendPay platforms include GBP, EUR and USD accounts and currency exchange under your own brand, powered by licensed partners. You can preview your platform before you pay.
Build it
Create your own financial platform.
Pick a template, name it, brand it, preview every page before you pay. Your brand, your users, your fees.
Build my platform →Questions people ask
How much could a rate move cost me?
See the effect of a rate move on a foreign payment.
Currency hedge calculator →What is a multi-currency account?
An account that holds several currencies.
What is a multi-currency account? →Read next
This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.