Which currency is expensive

Exchange Rates: The Price of Money - Why does money exchange cost fees

Every day, the cash experts in the branches change countless types a thousand times over - and charge fees for them. For many customers, it is not always understandable why supposedly high fees are due for the brand swap. We are therefore looking for traces of the “price of money”.

Why is the premium for the US dollar different from that for the shekel?

For retailers, money is one thing above all else: a product. Buying, keeping and reselling this means one thing above all: costs. Hence, it is a matter of understanding what is actually so expensive about holding cash on hand.

Many customers keep wondering why it can cost so much to exchange their euros for US dollars or South African rand, why ReiseBank is adding a premium to the Turkish lira they have bought back or why the Israeli shekel is suddenly worth so much less outside the country should. There are several reasons for this.

On the one hand, there is a kind of two-class society when it comes to money. The larger the volume, the cheaper it can be traded. We take a look at such top sellers in the brand business: US dollars, Swiss francs, British pounds.

The currencies mentioned make up a large part of the volume of sorts that the branches move. It is understandable that such frequently traded goods are subject to high price pressure. The demand is great. There is competition and it is pushing the course. And the exotic ones? They have to be kept in the branch offices and primarily cause costs there.

At the riceeBank does not work the money, but the employee

Cash, regardless of the currency, is therefore initially dead capital for ReiseBank. That is one of the differences to a "normal" bank. The house bank lets the money in the account “work”, that is, it pays interest for it, depending on the type of investment, and sends it out of the house, so to speak, so that it in turn generates income.

At ReiseBank, the capital is initially in the cash register of the branches without income and waits for customers to ask for it. Then it is changed for a fee. So it can be profitable. While the money is in the till, it does not generate any capital at first, it costs much more. Every day. And the list of cost drivers is long.

Procurement costs are purchase and transport

First there are the procurement costs. They can be divided into two components: the purchase and the transport. The trading team has to buy the varieties in the traditional way. In large quantities and amounts. Now the bank has the money and that's where the challenge begins.

Cash that is lying around always incurs costs. After all, it has to be transported somewhere again. This brings you to the second position of procurement costs, transport and distribution. You don't just put large amounts of money in a parcel and hand it to the postman.

Money is a value that may only be transported by a qualified and security-technically equipped value transport company (WTU) with appropriate security requirements. This WTU distributes the varieties to the desired locations. Money not only has to go to the office, it also has to be picked up from there.

If a customer comes to a ReiseBank branch and puts a large amount of Indian rupees or South African rand in the till, the cash expert will have to decide at the end of the day whether to sell or buy some of the currencies that are rare for him ensures that these are passed on within the branch network. In this case, however, the physical money must always be transported from A to B and booked.

It has to be counted, checked, sorted and packed

Processing money simply costs money. It has to be counted, checked, sorted and packed. In terms of accounting, these are just some of the cost drivers in the branches. After all, this requires qualified staff.

While most banks are trying to curb the pure checkout activities more and more and, for example, outsource the supply of cash to the customer at the ATMs, the human factor counts at ReiseBank. And at the counters there are not just cashiers, but real cash experts. After all, the service employees at the counter are specially trained and not only have the appropriate skills in serving customers, but also know how to check the money for authenticity and fitness for circulation.

When assessing whether the note placed in the recess is genuine or not, the employee first of all relies on his or her experience. How does the paper feel, have all the security features been met? This competence arises from years of experience - the employees are rewarded accordingly. Conversely, the customer benefits from the fact that they can be sure of the cash competence of the employees at the ReiseBank counter.

For competence and experience, the typical bank customer usually pays his house bank using the levy principle. He has an account, pays account management fees, has a loan, pays loan interest or, conversely, makes his money available to the bank for interest. Customers come to ReiseBank without an account and request a service that is also costly.

But the procurement and personnel costs are by no means the majority of the costs. There are exchange rate and default risks to consider. With particularly volatile currencies there is always the risk of strong exchange rate fluctuations. These can lead to price losses. These risks from exchange rate fluctuations must be hedged. That again costs money, the “price of stability”. The longer a currency is in existence, the lower its circulation cycle and its demand, the higher these risks are of course.

For example, the political situation in a country can lead to a massive devaluation of the currency. In the case of other varieties, even the procurement of the same is simply difficult. Nonetheless, ReiseBank has numerous niche products. No other institute supplies so many end customers with varieties. Conversely, the position also requires that, for example, in the large sorts of branches such as Frankfurt Airport or Central Station, almost a hundred currencies in various denominations are constantly available.

Unpaid content for customers and non-customers

To tell them apart at all, that in itself requires experience. And know. That is also anchored centrally in the ReiseBank and made available to the customer free of charge.

Anyone who researches foreign currencies on the Internet will quickly come across the currency information at www.reisebank.de. ReiseBank provides extensive information on each travel destination on its website. This primarily includes all relevant information about the currency itself, export and import restrictions and other information. This “unpaid content”, as this free know-how offer is called, also needs to be paid for.

Further operating costs on site and in the back office

In addition, ReiseBank must also meet a large number of legal and regulatory requirements and requirements. You actually need a license to change money, you have to take into account a large number of requirements and inspection bodies and, last but not least, you have to have security measures to protect employees and customers when storing and providing money: safes, safety glass, monitoring instruments - where valuables are stored the rules strictly.

On-site itself, in the branches, there are sometimes further, considerable costs that have not yet been listed: the lease and, in addition, energy costs and other things. ReiseBank, as a specialist niche provider for many years, is able to keep the mass of these cost-intensive processes listed very lean - nevertheless, this enormous cost apparatus has to be counter-financed.

The bottom line is that cash processing is time-consuming and costly - but it is still in demand. At the beginning of 2018, the Deutsche Bundesbank published its last cash study, according to which 74 percent of all transactions in this country are still paid for in cash. Measured against sales, the cash portion is 48 percent. Consequently, the German citizen only pulls out the card when making major purchases. The many small payment transactions in everyday life are of course still done in cash. Also abroad.