In international payments, a crucial cost for financial decision makers is the FX spread.
Whether you’re a CFO overseeing global supplier payments or a founder scaling into new markets, understanding the FX spread is essential to managing risk, protecting margins, and avoiding hidden costs.
In this article, we’ll break down what the FX spread is, why different providers offer different rates, how to tell if you’re getting a fair deal, and how transparency can lead to smarter decisions and real savings.
Table of contents
- What is the FX spread and how does it work?
- Why does the FX spread vary between providers?
- Why transparency matters
- How Privalgo gives you FX spread transparency
- 10 FX spread FAQS
What is the FX spread and how does it work?
The FX spread is the difference between the buy and sell price of a currency – or, more precisely, the difference between the interbank rate and the rate you’re quoted.
Let’s say you’re converting GBP into USD.
- The interbank rate (the one you see on Google or Bloomberg) might be 1.2900
- Your bank or provider could quote you a rate like 1.2700
- That 1.55% difference is the FX spread
It’s how currency providers make money on your trade – and it can cost you a lot, especially if it’s not disclosed clearly.
Why does the FX spread vary between providers?
Not all spreads are created equal. Here’s why one provider might quote you 1.2750 and another 1.2650 for the same transaction:
Provider business model
Traditional banks typically offer a wide range of financial services, from mortgages to credit cards. FX and international payments are just one small part of what they do.
Because of this, their FX rates may be less customisable and more costly than specialist fintechs.
Some traditional banks may also rely on longer internal processes due to their size – which can be slow and expensive. These overheads may be passed on to customers via higher spreads and fees.
Currency pair
Major currency pairs (like GBP/USD or EUR/USD) are the most traded in the world. They see high daily volumes and constant market participation from banks, governments, hedge funds, corporates, and individuals.
This high liquidity makes it easier and cheaper for providers to buy and sell them. As a result, spreads stay low – meaning you get more value for your money.
On the other hand, pairs involving exotic currencies like the Philippine peso (PHP) or Barbadian dollar (BBD) are traded less frequently, more prone to volatility, and can be subject to capital controls or regulatory restrictions.
This makes them riskier and more costly to trade. Customers may find these costs passed onto them through wider spreads.
Volume and frequency
If your business trades frequently or in large volumes, you may be able to negotiate a better rate as part of a commercial agreement – depending on the provider. However, they might apply a flat margin regardless of your trade size.
Time of day or market volatility
In volatile markets, providers may widen their spreads to protect against risk. This is especially common during major political events or out-of-hours trading.
Why transparency matters
The problem with FX spreads is not just the cost – it’s the opacity.
There are many reasons why your costs could vary, so it’s difficult to say what a good rate for your business looks like.
That’s why knowing exactly what you’re being charged is essential.
Without knowing your FX spread, it becomes difficult to:
- Compare providers
- Benchmark performance
- Understand your real cost of doing business globally
And without that transparency, your business might be leaving money on the table.
How Privalgo gives you FX spread transparency
For financial decision-makers, understanding the FX spread is crucial for your financial strategy.
Whether you’re budgeting for overseas expansion, managing international payroll, paying global suppliers or protecting profit margins, clarity on your FX costs is non-negotiable.
At Privalgo, we believe in complete transparency. That’s why we’ll clearly discuss all payment fees with you before you make any payments.
A breakdown of our fees could look like this:
- Fixed FX fee: 1%
- Swift: $15
- SEPA: €1
- FPS: £1
- Account opening fees: £0.00
- Account maintenance fees: £0.00
- Per transaction fee: £0.00
- Inbound fee: 0.50%
- Outbound fee: 0.0%
Once we’ve agreed on costs, you’ll be able to make transactions at the live exchange rate available to you in the Privalgo platform.
This means you can always work out the FX spread on your conversions and benefit from clear, competitive pricing with a human-led service that puts your business first.
Get in touch with a Privalgo Currency Specialist to learn more about how our transparent rates can bring confidence to your financial strategy.
10 FX spread FAQS
Below are five frequently asked questions about FX spreads. Some have answers using content already discussed in this article.
What does FX spread mean?
An FX spread is the difference between the buy (bid) and sell (ask) price of a currency pair. It represents the cost of trading and is how providers make a margin on currency exchange. The tighter the spread, the better value you typically get.
How is the FX spread calculated?
To calculate the FX spread, subtract the bid price from the ask price.
For example, if GBP/USD is quoted as 1.2680 (bid) / 1.2683 (ask), the spread is:
1.2683 – 1.2680 = 0.0003 (or 3 pips).
Why does FX spread matter to businesses?
Spreads directly affect how much foreign currency your business receives when exchanging money. Wider spreads mean higher costs, which can reduce your profit margins — particularly when making regular international payments.
What causes FX spreads to widen?
FX spreads can widen due to:
- Market volatility
- Low liquidity
- After-hours trading
- Economic or geopolitical events
Providers may increase spreads to manage risk in these conditions.
Is an FX spread the only cost involved in currency exchange?
Not always. Some providers may also charge transaction fees or apply hidden markups on top of the spread. It’s important to work with a provider that offers transparent pricing and full visibility over all costs.
