How Does the Wholesale Foreign Exchange Market Work?

(Bailey Kursar) #1

(Alex Sherwood) #2

@rdingwall so a question that’s been asked in this post is essentially which rate(s) does Monzo use -

First to display the converted transaction amount in the app - judging by the screenshot from that post

it’s the spot rate.

Secondly, when the payment settles, is the mid rate used (I assume that this is the rate listed on MasterCard’s website) or is the spot rate still used?

(Richard Dingwall ) #3

Hi @alexs! MasterCard authorisations do indeed use a live bid rate which is frequently updated throughout the day. :slight_smile:

Settlements are processed together in batches. There are several clearing cycle batches each week day. A transaction normally settles a few days after the original authorisation, during which time the exchange rate can change. This is why Monzo shows the exchange rate as pending. :hourglass_flowing_sand:

Each clearing cycle uses a single exchange rate determined by MasterCard. This means that although your two ATM transactions are showing different rates after they have been authorised, it is likely they will be have the same exchange rate after settlement because they will be processed in the same clearing cycle.

Multiple clearing cycles per day also means that sometimes the exchange rate you see for a settled transaction varies slightly from the official MasterCard daily exchange rate webpage. (Because the webpage displays an average across of all of the clearing cycles).

MasterCard estimated exchange rate when traveling
In-App Exhange rate
(Richard Dingwall ) #5

Also - all rates are bid (aka buy) rates. :slightly_smiling_face:

(Adam Kendrew) #6

Would it be possible in the app to show the fluctuation between the pending rate and what was actually processed?

For example, I used my Monzo card in Faro Airport yesterday in duty free; I purchased some goods which at the time appeared on my card as £156.25 (an exchange rate of £1 = €1.12). However after it settled it went up to £158.58 (still at the same exchange rate). It would be good to show in the transaction somewhere that the difference once the transaction settled was £2.33? :grin:

(Dawid) #7

I realised there has not been any reply for ASKendrew question? Monzo Team is that possible to show the fluctuation, or to mark a feed item with different background colour to also bring the attention that the amount debited from our account has indeed changed?