Transactions abroad or in a foreign currency

(James Nicholson) #11

@aspark I can’t seem to match your numbers:

For 8 December 2015, I see:

MasterCard rate: €1 = £0.720104 [1]
Market rate (used by e.g. TransferWise): €1 = low: £0.72027, high: £0.72772 [2]

That means, for €1,000, you’d get:

MasterCard: (€1,000 x 0.720104) = £720.10

low: ((€1,000 - €4.98 fee) x 0.72027) = £716.68
high: ((€1,000 - €4.98 fee) x 0.72772) = £724.10

i.e. MasterCard are giving a rate very close to the mid-market rate for the day. Discrepancies were, I suspect, because we picked a day in which the Euro climbed around 1% against the Pound :smiley:


(Alistair) #12

@james looks like the mastecard tool had returned the data for the 7th instead. data from transferwise was the one at time of posting towards end of day.

It does seem that the difference is smaller however this remains the cross-rate so the effective rate might be less favourable - mainly due to most card transactions being much smaller than 1000€/£

*Due to possible rounding differences, the published calculated cross-rates may not precisely reflect the actual rate applied to the transaction amount when converting to the cardholder billing amount.

It also doesn’t reduce the benefit of timing money transfers to happen when the exchange rate is most favourable.

(Alistair) #13

I guess the conclusion is that if you are using Mondo’s card abroad and you are only visiting the country for a few days then just pay by card. If you need cash, use the Mondo card in a local ATM and avoid Travelex / Post Office / et al (making sure to let Mondo/Mastercard do the conversion rather than the local ATM)

As for 1000£ you’ll get 1398€ with Mastercard’s rates but only 1345€ with Travelex (a 53€ fee!) or 1350€ with Post Office (a 48€ fee). [noting these are tested on the 9th at 3:30pm so different day than the aforementioned mastercard & transferwise rates]

This however doesn’t really apply to other banks or credit cards as they do have additional fees above mastercard’s rates. e.g Lloyds current account is 1.5% with min 2£ - max 4.50£ for cash withdrawals or 2.99% + 1£ on card transactions. Natwest/RBS is in a similar range, no doubt the others are too.

I used to use as the rates were better than the bank’s own but at 1000£ => 1368.9€ it is better than the retailers but no better than visa & mastercard’s rates & Transferwise is definetely a much better choice for those large 1000£+ transfers.

With regards to why having multi-currency account would be worth looking into for Mondo, currently Barclays and a few others do have Euro accounts but they used to charge exchange transfer fees from your euro balance when doing a euro transaction (WTF?!), it seems they’ve reworked the product but still have weird 25£ fees to do transfers from that euro account to another SEPA euro account or 6£ fee if you want to pay into it.

The only one which doesn’t is Citi with the Citigold account which allows GBP, USD & EUR balances tied to the same account & card without any fees but account eligibility is really only for the elite (£75000 balance or 300£ annual fee).

There are a lot of European nationals in the UK/London so it’s not a small market. London is France’s sixth biggest city and if you add up all of the other EU national, that probably is a market of about a million people who could do with consolidating their various accounts into one.

(simon) #14

This is incredible. As someone who’s about to go to NYC for 3 weeks this makes me so happy! Thanks @aspark!

(Richard Dingwall ) #15

I can see there’s a bit of confusion here about comparing mid, bid and intraday exchange rates!

So here’s a quick recap of FX market infrastructure basics, and a comparison of MasterCard/travel shop/ATM exchange rates! :dollar: :airplane:

What’s the price for a Currency?

In a stock or commodities market, contracts are priced in monetary terms, usually the local currency or USD. For example, the current price of an $AAPL share is around $115, and a barrel of oil is $40.

But FX is money itself, so we have to express the price as the rate of exchange for one unit of currency (the Quote currency) for one unit of the other currency (the Base currency). For example:

  • EUR/GBP: I have euros and want to buy pounds
  • GBP/EUR: I have pounds and want to sell them for euros

Exchange Rates

The exchange rate is quoted to several decimal places - usually 4 DP, depending on the currency pair. For example, 1.3914.

Why do we need so many decimal places? It’s not possible to have £0.0001 or €0.0001 in your bank account. But contract sizes in the wholesale FX market can be huge - easily tens or hundreds of millions. At this level, the granularity provided from additional precision allows market pricing to be much more efficient (competitive).

Spot Market

The wholesale market used by banks, governments, investment funds and corporates to buy and sell foreign currency is called the Spot Market. Spot means “on the spot” prices for soonest delivery possible. The standard settlement period for spot trades is two business days.

Around $5 trillion per day is traded on the spot market. It is by far the biggest and most liquid market in the world.


Contracts are traded either over-the-counter by banks, or on exchanges like FXAll, Hotspot, EBS and Currenex. All exchanges use a continuous auction style called a Limit Order Book. The software at the heart of an exchange that manages the Order Book is called a Matching Engine, and must be very fast and reliable.

Normally, trading firms pay a lot of money to see the exchange’s order book contents (called Level 2 Market Data), because the additional information gives them a trading advantage. But luckily for us, Bitcoin exchanges work in exactly the same way, and publish real-time data for free, so we can use that as an example. Here is Coinbase’s live order book:

The order book is divided into two halves. On the left are the Bids (buyers), and on the right are the Asks (sellers). Each side shows the total Liquidity (amount available to buy or sell) at each Price level.

The outward-curving shape of the order book demonstrates basic supply and demand. Buyers (on the left) want to secure the lowest price possible, so there are more buyers at the outside of the book (where prices are lower), than in the centre. Similarly, sellers (on the right) only want to sell for the highest price possible, so they crowd towards the right hand side (where prices are highest). If an order crosses over, then a trade is executed, and the orders that were filled are removed from the book.

The order at the top of the bid (left) side is called the Best Bid, and represents the highest (most attractive) price you can currently sell for. On the ask (right side), the Best Ask is the order with the lowest (most attractive) price you can buy for.

Bid/Ask Spread

The gap in the middle is called the Bid-Ask Spread. In stressed market conditions (e.g. a crash), the spread widens as the risk of loss increases and participants withdraw their liquidity.

The Spread is measured in units called Pips. For example, a change from 1.3914 to 1.3915 is a 1 pip increase.

(Side note: In interest rate and credit markets, the equivalent of Pips are called Basis Points.)


Not every currency pair can be traded. For example, as far as I am aware there is no exchange in the world you can trade ILS/NZD directly, because the market is too small (illiquid). Currency pairs like these are ‘crossed’ through another currency e.g. ILS/USD -> USD/NZD. Typically, most currencies can only be traded against EUR, JPY, GBP and CHF, and any direct rates you see are indicative through triangulation.

Official Daily Rates

Exchanges can process many thousands of orders per second, constantly fluctuating the price. So how do we publish a single, official exchange rate for a given day?

We could take the average rate from all trades throughout the whole day, but if a lot of very small trades (say £1 each) and one large trade (£1 billion) were executed, then it wouldn’t be a true representation of the volume traded - it would be skewed towards the small trades. Also, should the measurement be equally weighted throughout the day, or are most people only interested in the end result?

In reality, the most commonly-used official daily exchange rates rates are Fixed based on a 60 second sample at a given time of day:

The WM/Reuters benchmark rates are determined over a one-minute fix period, from 30 seconds before to 30 seconds after the time of the fix, which is generally 4 pm in London. During this one-minute window, bid and offer rates from the order matching system and actual trades executed are captured. Since trades occur in milliseconds, only a sample is captured, rather than every trade. The median bid and offer are calculated using valid rates over the fix period, and the mid-rate is then calculated from them.

Mid Rates

The most common exchange rate you see in news articles and on TV is the Mid Rate, calculated as the average of the Best Bid and Best Ask price.

The Mid Rate can be useful for historical analysis, but it is important not to use it for comparing prices:

  1. It hides the fact that there are different prices for buying and selling (supply and demand)
  2. It is a purely Indicative rate - it is never possible to buy or sell the mid rate because there is no liquidity (orders available) at that price

(Side note: TransferWise uses the Mid Rate but this is unique to TransferWise - they appear to be running a different style of auction with fixed daily rates instead of a true limit order book).

Comparing Spreads

Dealers make money by adding either a Commission (percentage of the total amount), a flat Fee (e.g. £2), or their own Margin to the spread, reflected in the advertised exchange rate. Margin is the most common, and is usually advertised as “commission free”, however the spread can be very wide!

I did some analysis and compared EUR/GBP spreads between various retail FX brokerages, travel money shops and the MasterCard base rates:

  • Wholesale: < 1 pip
  • Retail FX brokerage account: 1 to 5 pips
  • Thomas Exchange: 150 pips
  • ATM in Europe using local currency: 500 pips
  • ATM in Europe using “convert to home currency”: 700 pips (never do this!)
  • Airport foreign exchange shop: 900 pips!

The MasterCard rates are incredibly good. As @aspark noted, if you need to buy €1,000 of travel money, you could save between £10-90 compared to a travel money shop or ATM. :moneybag:

This week at Mondo Towers
(tom) #16

Great write-up. We’d love to publish this on our blog (or cross-post if you want to put it up on a personal blog)?

Transferwise fees seem to add up to about 100 pips of spread - £4.98 on £1000 each way, or £9.96 across 2 trades.

(Tristan Thomas) #17

For anyone interested in this, we just published this blog post by @tom that talks a bit more about how we deal with foreign transactions:

(Alistair) #18

I think the fact you get charged 30p per transaction explains why the traditional banks see this as a chargeable thing. Hope we aren’t costing you too much!

Would be awesome if you can keep the at Mastercard/Visa exchange rate with no extra cost for foreign transactions long term.

My understanding was that traditional banks essentially make their money by charging retailers for those transactions so do you get any return from that or is it purely a cost?

I guess you will have much lower overheads without the need for branches and the associated staffing for these so this might have a chance of being of being viable :smile:

Have you had a thought about the different products you will be offering once you have a full banking licence yet?


Hi @jonas Would not normally resurrect an old thread, but think my 2c would be more valuable here than in a new question-post.

Two use cases that came to my mind. Use case 1: Renting out real estate abroad (not in UK) and paying expenses, e.g. tax, mortgage, from the monthly rent payments. Reluctant to hold money in any of the local banks. Don’t want to carry any additional currency risk in this situation, so would have to bank with the 3 banks in the UK that have currency accounts in their product range.
Use case 2, similar to above: regular dividends from public companies in continental Europe are paid in euro. I would much prefer to receive them into my main set of bank accounts, in euro and without conversion.

In both situations forced to disperse funds across different banks in different countries, which is not very convenient.

Hope this helps.

(Mattia Ottonello) #20

Hi everyone! I am new here and I was just reading this thread, very convenient to spend abroad getting the real exchange rate without any fees. Is this convenient feature going to apply to Mondo on a long term? Does it apply to cash withdrawal made abroad as well? I am about to go to HK and Thailand and that would be very useful to get cash there without paying any fees or commission! Thanks a lot


(Simon Webster) #21

This will be good as heading to the States in July…


Yes, as previously asked - Is this non-FX fee something that is intended to apply in the long term?

Appreciate that it may be too early down the road to commit anything here yet, but this will be a massive incentive for me (and I’m sure very many others) to make the switch permanent when the current accounts are here

(John) #23

I had no idea Mondo did not charge FX fees; would’ve skipped going to M&S FX for Dirhams if I did. Looking forward to using Mondo in UAE and India over the next few weeks.

Also, @rdingwall, great write-up, thank you!

(Sebastian Beck) #24

Wouldn’t it be possible to list the percentage of currency lost against the actual rate. Also, what about displaying competitor’s rates.

(Sebastian Beck) #26

Ok thanks. I know mastercard is a good rate but it have to manually calculate how much i am loosing off the actual mid market rate.

For Euro
Mastercard: 1.276943
Mid Market: 1.26680

It turns out that Mastercard is about 0.8% over the actual mid market today. Weird.

Is this because Mastercard use the closing spot rate which was last recorded by Bank of England on Thursday as 1.2771?
(Not sure why it doesn’t post friday’s… Explain)


Firstly, Richard Dingwall’s write up was excellent. Holly heck, thanks for all that info so simply explained.

Secondly, I’d like to comment again regarding support for in-app currency swapping between major currencies. I am an American who is studying for a PhD in the UK, with family in the USA, Egypt, the Netherlands and Denmark. When I moved to the UK I started banking with Lloyds because their domestic use terms were really great, but have found recently that using my debit card internationally costs an absolute fortune if you’re not careful. Mondo is an incredible product for me because it helps me easily manage my spending at home, and it allows me to get around a lot of the hassle of dealing with Lloyds when traveling, regardless of where I go.

That said, I would be crazy not to check out the competition - so I recently stumbled upon Revolut. Revolut isn’t really a bank, but they allow you to top up a card similar to Mondo, and then use their app to swap between USD, EUR, and GBP instantaneously at the inter-bank rate so you know exactly what you are getting when you swap. It’s slick, and being able to transfer your funds to contacts who use Revolut basically means I can instantly exchange money with any of my family in the appropriate currency at a definitive, very low exchange rate.

The world is only getting smaller and smaller, and while I may be something of a fringe case at the moment, international lifestyles are becoming the norm for people who are interested in a product like Mondo very quickly. The Master Card exchange rate isn’t bad, but considering how smooth everything else about the Mondo experience is, it’s a little odd to see your expenditures change slightly after the couple of days it takes to properly process international transactions, which wouldn’t be the case if I were able to change into an appropriate currency before the money is even spent. Other than the in-app currency swaps, I don’t see anything Revolut does that Mondo can’t do better, and I think implementing a feature like this would pretty much make you the best banking solution for people looking to making banking abroad as easy as possible.

There’s my pitch.

(Daniel) #28

Hi Jonas,

I write in relation to the FX fees in the Transactions abroad or in a foreign currency thread of a few years.

_Would you be able to elaborate further on your comment ‘we don’t charge FX fees and give you the official MasterCard exchange rate at the time’

Is the above still the case? And, is there not a charge to Monzo? If this is the case is it sustainable?

Maybe you could contrast that with how a ‘classic’ bank would work that transaction?

(Richard Owen) #29

Does this help answer your questions, Daniel? Scroll about halfway to see the different between a ‘classic’ bank and Monzo. Apologies that Tristan already posted it further up the thread but it’s worth a re-read.

MasterCard use quite a fair mid-range fx rate each day. Basically it does cost Monzo to do this, but that cost is factored into their business model. Fingers crossed it is sustainable.

(Daniel) #30

a belated thank you richard!

(Alex Sherwood) #31

Here’s some more info, to answer your question - there is a cost to Monzo for all this & Tom shared has some insight into the implications of this since you posted the question here -

& here -

Typically the banks charge you to make purchases in other currencies, a foreign useage fee & an ATM withdrawal fee. So enough to cover their costs & then some :grimacing:

There’s more info on those charges here -