For most of us, money changers only come to mind when we are travelling abroad. Not many of us would think about what goes on behind the scenes at the money changer. Here are a few facts about money changers and currency exchange outlets that you might not know.
#1 All Money Exchange Rates are determined by the USD
Most of us are probably aware that the world’s reserve currency is the USD, but not many people know about the implication on forex. Do you know that by exchanging your Singapore dollars for let’s say, the Malaysian Ringgit, you are technically exchanging the SGD to USD, before converting it to the MYR?
Being the world’s reserve currency means that all currencies are primarily traded against the USD, and this has its roots in the Bretton Woods Agreement. To put it in simple terms, by exchanging your SGD for MYR, you are buying the USD for SGD and, selling the USD for MYR, which means that the two buy/sell quotes would affect the currency exchange rate you get. Hence, the country you are exchanging your currency in matters, as this can influence the buy/sell currency spread and the rate you receive.
#2 A Dangerous Profession
It is no secret that holding onto a large sum of money would leave you susceptible to the risk of robbery and theft. Despite being one of the safest cities in the world, money changers in Singapore have to be on guard and invest in security and CCTVs to ensure their safety as there have been several cases of money changers being robbed.
#3 A Challenging and Competitive Landscape
Setting up and maintaining a money changing service is by no means an easy feat. With more than 400 money changer outlets in Singapore, money changers not only face intense competition, but have to take on various challenges. The license fees today cost up to $1,300 today, compared to $50 in the past, and today’s money changers have to adhere to stricter regulations imposed by the authority, in an effort towards curbing terrorist funding and anti-money laundering.
What’s more, besides having to invest an additional sum of money on security, money changers today have to stay ahead of their competitors by spending on the right systems as the business is time sensitive – how much the money changers profit will determine how closely they follow the inter-bank foreign exchange rate. This proves to be a difficult challenge due to the recent exchange rate volatility.
At the minimum, they would need to have a cash counting machine, counterfeit checking machine, a receipt printer as well as a money changer software. The money changer has to take into account the socio-technical aspects before they consider whether such software are suitable for their needs, and this can range from the speed and reliance, to its user-friendliness.
#4 Other Services Provided By Money Changer
Besides exchanging your money, some money changers provide other services such as remittance and money transfer (for a small fee). If you have ever been to a currency exchange outlet, you might notice that most of them cater to visitors by selling maps, magazines, drinks, prepaid cards, and even tour services.
#5 Negotiation is possible
While you are exchanging a large sum of money, you may bargain for better rates. Consider going to money changers in Chinatown or Mustafa if you are in Singapore, as some money changer outlets in Mustafa or Chinatown allow you to negotiate before you exchange your money. Of course, it would be better if you conduct some research on the exchange rate before the deal.
So the next time you head down to a money exchange outlet, do look around and see what else you can find. Perhaps you might even learn a thing or two about money changers! You may also visit our Get4x website to learn more about money changers and the industry.
To look for the best money exchange rates, download our Get4x app.