Bound vs FX Brokers: Who should you use for FX hedging and conversion?

Well, that really comes down to a few things which we’ll dive into, but here’s the TL;DR

• How much time do you want to spend dealing with FX?

  • A few mins per month ⭢ Bound

  • Anything from an hour to a few days per week ⭢ FX Brokers

• Do you prefer fixed transparent pricing tiers or do you enjoy a ring round and barter

  • Fixed transparent pricing tiers ⭢ Bound

  • Ring round and barter ⭢ FX Brokers

• Would you prefer to primarily have a relationship with a Product  or a person?

  • Product ⭢ Bound

  • Person ⭢ FX Brokers

Intro

Now of course I work for Bound and for those of you who have checked out my Linkedin, you’ll know that I  spent the prior decade as an FX Broker, for my sins. I jest. But really, I moved into tech because over the years I watched the rise of FX apps like Wise and Revolut change the way companies do FX. They made simple Spot conversions easy, cheap and fast. But for anyone who wanted hedging at a better price than standard bank rates, they still had to speak to an FX Broker. Now, those days are over because of Bound.

So there’s my little story and I’m sure you’ve worked out which side of the fence I sit on 😅

Like many of you, I don’t like speaking with sales or customer service people either. I use Monzo for my personal banking, love the app and have never spoken to anyone there. I use Tradingview to keep an eye on financial markets, love the app and again, have never spoken to anyone there. I use Linkedin to stalk most of you, can’t say I love this one, but you guessed it, have never spoken to anyone there either.

For the purpose of this blog, I’ll be as impartial as I can - especially as FX is so esoteric and there is so much shite online that sometimes firing questions at an experienced professional over a short call is a much faster way to get the information you want.

How much time do you want to spend dealing with FX?

If you’re the type of person that loves having hundreds of tabs open with very many spreadsheets on different windows and paper with scribblings of random numbers all over your desk, then you probably want to deal with an FX Broker or maybe even a few of them. 

You see, FX is so much more than getting a  good rate right now. How much Value-at-Risk do you have? Do you need to protect a specific rate? Are you trying to optimise for avoidance of poor timing? What about when you’ve locked a rate and now you need to make a change to the amount or settlement date? What about taking some of your hedged currency now? How do you gather all the information you need for accounting and reporting? Do you want to be opportunistic by using a mixture of FX instruments? 

All of these things require speaking to someone at an FX Broker. Phone calls and emails take an enormous amount of time. But hey, if you’ve got the time, then why not spend it on the phone or going back and forth over email?

Or, if you winced reading the question “how much time do you want to spend dealing with FX” and immediately thought  “as little time as physically possible” then you sound like a Bound customer ;)

You can do all of the above on Bound very easily. Take a look at this video from our Founder Seth showing an example of how you can amend your hedges in a few clicks. 

Do you prefer fixed transparent pricing tiers or do you enjoy a ring round and barter?

If you’ve been around the block, you’ll know the FX Broker business model.

You get a fantastic introductory price (potentially even a loss leader), then slowly slowly, trade by trade, the rates start slipping and before you know it, you’re paying what you were or potentially even more than with your old FX Broker. It’s not too dissimilar from your car  insurance trying it at renewal and that pisses everyone off.

Now of course there are some honest folk out there who will keep your pricing at an agreed level and they may service you fantastically. But at some point, the FX Broker will be behind their target and need to make up lost ground. At that point, squeezing an extra little bit out of every single customer can make a material difference at an aggregate level.

Things get particularly tricky when rates are moving fast or you’re trying to make amendments to an existing transaction, like a drawdown from a forward for example. Namely because unless you have access to a live forward point stream, you can’t see how much you’re being charged.

So now most people have accounts with a handful of FX Brokers and play them off against each other to ensure competitive pricing. Bartering can be fun. Who doesn’t love to have a little go at a car boot sale or when you’re buying a fun hat on the side of the road whilst on holiday? Some people enjoy the barter of ringing round a few FX Brokers.

But what if you don’t have time for that? What if you’d rather know exactly how much you’re being charged for booking transactions, amending them and how much extra volume you need to transact to hit the next discount tier? 

Well then you’ll probably want to see how much Bound will charge and you can do that here.

Would you prefer to primarily have a relationship with an app or a person?

I say “primarily” because unlike a lot of financial apps, Bound has a team of vastly experienced FX professionals that are on hand when you need them. But as our Founder Dan always says - if you have to talk to someone at Bound, then Bound is doing something wrong.

If you’re the kind of person that doesn’t like apps and would prefer a high touch relationship to manage their FX, then you will certainly want to use a FX Broker. 

You’ll get to know each other really well and may even become good friends!  This is nirvana for FX Brokers because it means you’re not paying attention to rates anymore.  I’ll say it again, there are a handful of good folk out there with a strong moral compass that will keep your pricing consistent. But when they are behind target and their manager is shouting at them to make more money or their job will be at risk- what do you think they are going to do? What would you do?

You may like to spend time chit chatting with your FX Broker about where rates are potentially headed. This is defined as speculation and is not something that you’ll be able to talk to anyone at Bound about. Why? Because we don’t speculate on currencies, we create easy workflows so you can hedge your risk yourself in just a few clicks.

If you’d prefer to have the tools you need to manage things yourself, then Bound would certainly be more up your street.