Bureau de change
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A bureau de change[1] (plural bureaux de change, both /ˌbjʊəroʊ də ˈʃɒnʒ/ BURE-oh də SHONZH; British English) or currency exchange[2] (American English) is a business where people can exchange one currency for another.
Nomenclature
Originally
In the United States and English-speaking Canada the business is described as "currency exchange" and sometimes "money exchange", sometimes with various additions such as "foreign", "desk", "office", "counter", "service", etc.; for example, "foreign currency exchange office".
Location
A bureau de change is often located at a
Business models
A bureau de change is a business which, in competition with other similar businesses, makes its profit by buying foreign currency and then selling the same currency at a higher
The exchange rates charged at bureaux are generally related to the
The bureau sells at a lower rate from that at which it buys. For example, a UK bureau may sell €1.40 for £1 but buy €1.60 for £1. Quite often the terms "buy" and "sell" are used the other way round by a bureau de change, and the buy rate may seem higher that the sell rate: in such cases, it means "we buy/sell our local currency at the rate shown" (examples from Google Images).
For example, suppose that the spot price on a particular day is €1.50 to £1. Theoretically, an average consumer could exchange £2 and receive €3 (or vice versa), but in practice they would find it very hard if not impossible to secure such a rate. On that same day, a bureau de change might buy £1 for €1.40 and sell £1 for €1.60. If a consumer sold £1 to the bureau and then immediately bought back as much currency as possible, they would end up with (1.40 / 1.60) = £0.875, leaving the bureau with a revenue of 12.5 pence (12.5% of the original £1).
This business model can be upset by a currency run when there is a great imbalance between buyers and sellers because they feel a particular currency is overvalued or undervalued.
The business may also charge a commission on the transaction. Commission is generally charged as a percentage of the amount to be exchanged, or a fixed fee, or both. Some bureaux do not charge commission but may adjust their offered exchange rates. Some bureaux offer special deals for customers returning unspent foreign currency after a holiday. Bureaux de change rarely buy or sell coins, but sometimes will at a higher profit margin,[citation needed] justifying this by the higher cost of storage and shipping compared with banknotes.
In recent years, together with the emergence of online banking, currency exchange services have appeared on the Internet. This new model allows more competitive exchange rates and threatens traditional bricks-and-mortar bureaux de change.[3] Online currency exchange has two main models: the more popular model is provided by an established bureau de change, while social currency exchange platforms such as WeSwap allows participants to ask or bid for currency at their own rates (usually with an additional transaction fee).
The business model of traditional money changers is coming under threat by many new innovative fintech start-ups offering e-wallet foreign exchange alternatives that offer low or no currency exchange transaction fees.[4]
It is estimated that the total revenue of this industry is $362 billion [citation needed]
Peer-to-peer foreign exchanges
The rise of
Consumer issues
Changing money at a bureau is often more expensive than withdrawing it from an
Some may also prefer to hold foreign currency rather than change it back if they are expecting to return to where it is used. Companies that frequently send employees abroad may essentially act as their own exchange by reimbursing their employees in the local currency and holding the foreign currency. If exchange rates are relatively stable, the fees charged by a bureau may exceed any likely fluctuation and it also makes the company's
In the alternate, some prefer to buy their currency before they travel, either just for a sense of security against credit card fraud typically achieved by tampered card readers or hackers, or because they expect to benefit from more favorable conditions thinking the exchange rate is better at that time than it will be when they make their trip. As well, some places may only take cash or have credit card terminals down.[citation needed]
In 2002, many bureaux reported substantial reductions in profit due to the replacement of many European currencies with the euro.[citation needed]
Illegal activity
Bureaux de change offer an opportunity for
See also
- CLS Group
- Currency pair
- Digital currency exchanger
- Exchange rate
- Financial instruments
- Foreign exchange company
- Foreign exchange market
- Gold standard
- List of international trade topics
- Money changer
- Money laundering
- Tables of historical exchange rates to the USD
References
- ^ See, for example, A tourist site for London, A Bureau de change, Bureau de change exchange rates
- ^ See, for example, Kennedy International Airport Archived September 16, 2009, at the Wayback Machine
- ^ "GF24 - Gazeta Finansowa Online". Archived from the original on 2013-12-11. Retrieved 2014-04-28.
- ^ "10 Top Fintech Start-Ups to Watch in Asia: Innovators in FX". 4xLabs. Retrieved 2019-12-24.
- ^ "How to avoid currency cowboys while cutting the cost of transfers". The Daily Telegraph. Retrieved 2013-11-11.
- ^ "What is a Money Services Business?". Biz4x. Retrieved 2019-12-24.