The Ukraine crisis has brought foreign exchange volatility into sharp focus, with the Russian Rouble collapsing 45% in just days and the Euro falling 21% against the Dollar in a fortnight
- Over the past decade the Pound has plunged more than 10% in a less than fortnight on multiple occasions — in response to the Brexit referendum and during the pandemic — as instability becomes a recurring threat
- But yo-yoing exchange rates are only half the story, and businesses wrestling with currency fluctuations can now use a free tool that also shows the impact of commission on their trades
- Fintech Bound has designed its Commission Rate Checker to bring true transparency to the process of currency hedging, showing how much broker fees can bite from the bottom line
- The London-based fintech has been expanding rapidly since launching in November 2021 and now has 25 employees, while client numbers have grown by 400%
London, 25th March 2022 — UK businesses left reeling by the wave of exchange rate volatility unleashed by the war in Ukraine can now find their bearings thanks to a new tool, which shows how much currency broker fees add to their cross-border trades.
The Commission Rate Checker created by the intelligent hedging platform Bound enables firms to enter the rate they have been quoted by an FX broker, and then unpick how much commission is added to the cost of their trades.
Its launch comes in the wake of extended exchange rate turbulence over the past 10 years, with significant currency market moves triggered by both the Covid-19 pandemic and the Brexit referendum.
More recently the war in Ukraine has seen not only the collapse of the Russian Rouble, which slumped by 45% in a week against the Dollar*, but a fortnight in which the value of the Euro fell 21% against the Greenback**, reflecting concerns about oil supply in Europe.
Rapid shifts in exchange rates can make the difference between making a profit or a loss on any deal that involves buying foreign currency. And some dramatic currency declines can happen in a few hours, or even minutes, in what are known as flash crashes.
On 7th October, 2016, a flash crash in the value of sterling, saw it drop more than 6% in two minutes against the Dollar due to market fears of a hard Brexit. And a year earlier, Switzerland’s unexpected decision to abandon its currency peg with the Euro sparked a huge move in the currency markets in January that saw the Euro fall by 41% against the Swiss Franc within 24 hours.
Businesses that regularly make transactions in foreign currencies use hedging to mitigate the immediate exchange rate risk posed by geopolitical events.
By hedging with Bound they can lock in the most favourable exchange rate, time after time, with a guarantee that their commission costs will not change. The Commission Rate Checker, which calculates brokers’ surcharges by using the interbank rates that banks use when they trade with each other, also reveals how a quoted FX rate compares with what Bound offers.
The start-up, which launched in November 2021, is expanding rapidly and now has a team of 25, including key hires from Uber, Revolut and People.ai. It has already raised more than $6.5 million in seed funding from the backers of fintech success stories, including Klarna and N26, and has grown client numbers by 400% in the first quarter of 2022.
Bound CEO Seth Phillips commented:
“2022 promises to be another exceptionally volatile year for currencies. The ongoing impact of Covid, the global fallout of war in Ukraine, inflation and rising interest rates all point to a bumpy ride which could cause headaches for businesses trying to manage the financial risk of fluctuating exchange rates.
“The Rate Checker is an important tool for any firm wanting to review their hedging options. Unlike many brokers, whose rates of commission can vary depending on how the wind is blowing, at Bound our fees are set in stone and there are no sales incentives at play. This is part of our commitment to transparency and gives business customers clarity and certainty that the rate they see written down is what they’ll get.”