As an individual making an international transfer, in many cases you can't access the mid-market rate. Nope.
Most providers will instead give you a slightly worse rate than the MMR.
This creates some margin for them to pay their staff, reach more customers, and hopefully have some profit left over.
Let's imagine that, according to the mid-market rate, £1,000 can be exchanged for 1,180 EUR.
That implies a mid-market rate of 1 GBP = 1.18 EUR.
But if you try to send £1,000 to Spain with most money transfer companies, you won't receive 1,180 EUR.
That's because they will give you a less favourable rate than mid-market. Often not by much, but it's something to keep an eye on - especially for large transfers.
If a company quoted you 1 GBP = 1.17 EUR, then you will receive 10 EUR less than the mid-market rate would suggest.
Some companies do actually let you convert at the mid-market rate... 😍
But it's not quite as ideal as it may sound. More on that later.
A more technical definition
For those more into finance, I'll give you the more nuanced explanation of what MMR is :
It's the rate that banks and financial institutions use when trading currencies amongst themselves, and is free from any markup or margins added by third party companies.
What do you mean by 'buy and sell price'?
Financial markets are comprised of buyers and sellers.
For any given pair of assets (in this case, currencies), there is:
a price at which people are willing to buy
a price at which people are willing to sell
The mid-market rate is the average, or mid-point, of these buy and sell prices.
How can I send money at the mid-market rate?
I mentioned above that, in some cases, it is possible to send money at the mid-market rate.
The catch? You'll still be charged fees. Though depending on the company and your exact transfer fees, these could be minimal.
The following companies claim to offer mid-market rates, supported by transparent fees:
Wise - one of the first companies to offer a fee structure based on mid-market rates
Zing - a new competitor to Wise, backed by HSBC. Offers mid-market rates with low fees.
The interbank rate is another word for the mid-market rate.
Banks trade with one another using the MMR, which is why it's also referred to as interbank rate.
Is it always best to get the mid-market rate?
On the face of it, this sounds like an easy "yes".
However, MMR is just one factor in calculating the cost of an international transfer. It's important that we don't forget about fees.
Think about it this way:
MMR rate + fees - offered by the likes of Wise and Zing.
Non-MMR rate + zero fees - offered by the likes of TorFX and Regency FX.
Non-MMR rate + fees - offered by the likes of Remitly and Transfergo.
Which of these three options is best? The answer: it depends!
Any of them could be cheapest.
The only way to know is to compare the full transfer cost for your specific details.
