What price a dollar? Count your Re

Vijay C Roy in Chandigarh

We all care for our rupee, and mostly, as much less about its interface with other currencies, chiefly the American dollar. Currency exchange dealers are a dime a dozen while banks are there for their standard operating procedure: show this paper, that paper, and take it or forget it. There is an information asymmetry, putting you at times at a disadvantage for each dollar for a rupee. Economy is math, too, especially when a student goes abroad or a tourist tries to strike the best bargain. What do we know of it? Here’s an instance:

Shruti Arora, a research scholar, was to be in Vienna for a seminar. Among the essentials such as passport, visa and tickets, she needed foreign currency. She asked her husband to get the best rates for Euro. What her husband did was cumbersome: he compared the available rates, including the ones offered by banks, and found a difference of Rs 1.05 per Euro. Convinced, finally he asked his father to convert Rs 1 lakh into the Euro. 

Rates vary

Experts say exchange rates vary at hotels, airports, banks and even dealer to dealer. Also, even if you want to buy foreign exchange through a credit or debit card, the rates are different. According to rough estimates the exchange rates varies from one to 10%, which could mean a huge sum for students as foreign currency is a must for depositing course fees, accommodation, foreign travel etc. 

That’s where money changers come in. “This is our core area of expertise. We work on volumes and offer lucrative rates to customers, at times even on thin margins to retain them. Unlike banks, we have flexibility of time,” says Rajneesh Bansal, executive director, Paul Merchants Ltd, which is the leading player in the Northern region, having 300 branches across the country and around 115 in the northern region. The company is in ‘authorized dealer category 2’ as per Reserve Bank of India norms, which put banks in ‘category 1.’

According to the latest report by MM Advisory Services, which provides specialist solutions in international education, more and more Indian students are going to the US, Australia, Canada, New Zealand and Germany. It is estimated that in terms of growth rate, India is set to overtake China. In absolute numbers China is still well ahead with almost 700,000 internationally mobile students, close to double of India’s figure of 360,000. Nearly 85% of internationally mobile Indian students head for five countries: the US, UK, Australia, Canada and New Zealand. China and Germany are emerging destinations. This indicates massive transactions in foreign exchange. 

Getting the best deal

The smartphone revolution has brought about a paradigm shift. A few startups like Fxkart, BuyForexOnline, BookMy Forex and others have jumped into the market. These companies aim to make foreign exchange trading easier through their web and mobile platforms.  Fxkart offers services free for the end consumer monetizes through business-to-business channels. They earn a commission for transactions through their portal. Dealers need to supply their live rates in real time and bid for the consumers’ attention and forex requirement in a five minute bidding window.

“We are one of the largest online aggregators of RBI’s licensed foreign exchange dealers. We provide basic information to the consumer on a simple web platform and mobile platform for free,” says Abdul Hadi Shaikh, CEO, Fxkart. He says banks and money changers load exchange margins ranging from 1 to 2% at their city offices to as high as 7-8% at airport counters. Their forex booking mobile app showcases 1,300-plus dealer locations across the country. The app includes features like geo-location, instant chat and deal tracking. It claims to offer rates by comparing them across foreign exchange dealers in a city who compete for business.

Shaikh says the app is a one-stop solution for all foreign exchange needs, be it remittances for education or maintenance purposes. The biggest advantage of this app/web portal is that customers can compare rates at transit locations. For instance, if someone is going to Canada via New Delhi from Jalandhar and has found a better rate in New Delhi, the customer can always place an order and get forex in New Delhi before flying off. 

Similarly, BookMyForex platform operates like the stock market, and seeks to bring about more transparency by “updating rates every three seconds”. It reportedly covers more than 5,000 banks and money exchange locations across 650 cities.