How to Audit Your Bank's FX Markup: A CFO's Guide to Reading the Spread

Your bank does not charge you a competitive exchange rate. It charges you the mid-market rate plus a margin that it does not disclose on your transaction confirmation, does not itemise on your statement, and has no contractual obligation to hold at any particular level.

This is not a conspiracy. It's the standard business model for bank FX desks. The margin is how they earn revenue on your international payments. The problem isn't that it exists — it's that you almost certainly don't know how large it is.

The average bank FX markup on cross-border business payments runs between 2.5% and 4.0% above the interbank mid-market rate. On £1M in annual FX volume, that's £25,000 to £40,000 in spread cost that never appears as a line item on any invoice. It disappears into the rate itself.

This guide shows you how to find it.

Step 1: Pull your last three months of international payment confirmations

Every international payment your bank processes generates a confirmation that includes the exchange rate applied, the amount debited, the amount credited to the beneficiary, and the date and time of execution. Collect these for your last 12-16 international payments.

If your bank doesn't provide payment confirmations with the exchange rate, that's your first red flag. You're paying for a service where you cannot verify the price.

Step 2: Find the mid-market rate at the time of each payment

The mid-market rate — also called the interbank rate — is the midpoint between the buy and sell price on the open FX market at any given moment. This is the rate banks trade with each other. It is not the rate they give you.

For each payment confirmation, look up the mid-market rate at the date and time of execution. You can use publicly available sources: the Bank of England publishes daily spot rates, XE.com provides historical mid-market rates by the minute, and Bloomberg Terminal provides second-by-second data for treasury teams with access.

Write down the mid-market rate next to each payment's applied rate.

Step 3: Calculate the spread on each transaction

The formula is straightforward:

Spread (%) = ((Mid-market rate − Applied rate) ÷ Mid-market rate) × 100

For example: if the mid-market GBP/USD rate at the time of your payment was 1.2650, and your bank applied a rate of 1.2350, the spread is:

((1.2650 − 1.2350) ÷ 1.2650) × 100 = 2.37%

On a £50,000 payment, that 2.37% spread costs you £1,185 in invisible margin. Your bank statement shows a single debit. It does not show that £1,185 of it went to FX margin.

Step 4: Look at what the spread does on your actual corridors

The spread varies dramatically by currency pair. Major pairs like GBP/USD and GBP/EUR tend to carry lower bank markups (1.5-2.5%) because the interbank market is deep and competitive. But the corridors where import/export businesses actually move money often carry much wider margins.

The USD/ZAR corridor is particularly instructive. South African rand is a liquid, freely traded currency — there is no fundamental reason why bank spreads on USD/ZAR should be 3-4%. The markup exists because most businesses don't benchmark it, so banks have no competitive pressure to narrow it.

Step 5: Calculate your annual FX cost

Take your average spread from Step 3 and multiply it by your total annual FX volume. This is your annual FX cost — the amount you're paying above mid-market for your bank to convert currencies on your behalf.

For context: a UK import business processing £2M annually through a bank charging an average 3% spread is paying £60,000 per year in FX margin. A specialist FX provider charging 0.5% on the same volume would cost £10,000. The difference — £50,000 — goes straight to gross margin.

That's not a rounding error. For many mid-market importers, it's the difference between a profitable quarter and a break-even one.

And that's before accounting for the working capital cost of slow settlement or the demurrage charges that pile up when payment delays hold up shipping documents.

What to do with this information

The audit itself changes nothing. What changes your costs is acting on it.

Option 1: Negotiate with your bank. Armed with your actual spread data, ask your bank's FX desk to match specialist provider rates. Some will — they'd rather reduce margin than lose the account. Many won't, because the FX desk margin subsidises the relationship elsewhere.

Option 2: Split your FX. Keep your banking relationship for credit facilities, lending, and domestic operations. Route international payments through a specialist provider. This is how most of our clients operate. See how different providers compare in our B2B FX platform comparison.

Option 3: Request mid-market benchmarks on every payment. Ask your bank to include the mid-market rate on every transaction confirmation going forward. This simple request often improves rates — because the bank knows you're watching.

The first step is always the same: measure what you're paying. You cannot optimise what you don't measure.

Unicorn Currencies Limited is a FINTRAC registered Money Services Business (MSB C100000159) and Bank of Canada RPAA registered payment service provider.