Key Takeaways
- Your FX costs may be hard to see because they aren’t a standard line item.
- Instead, your FX provider typically embeds costs in its exchange rate.
- Finding out how much you really pay can help you identify savings and develop a cost-reduction strategy, including by choosing a more affordable provider.
- At Payset, we show you our full FX rates and how they stack up to the competition.
Why FX Costs Are Invisible on Your P&L Statement
FX costs aren’t always visible on your profit and loss (P&L) statement. Unlike other costs, they don’t usually show up as a separate line item and can easily go unnoticed.
So where do the costs hide? Banks and trading platforms typically embed FX costs in the exchange rates they provide. That means you’re potentially losing value on every cross-currency trade and transaction as the hidden margin inflates the numbers.
Finding your true FX trading cost isn’t just about knowing how much you pay in absolute terms. It’s also about knowing how much less you could pay on a more cost-effective trading platform that more closely matches the real mid-market rate.
Here’s how to calculate your costs and present FX savings opportunities to your board — optionally using a Payset membership to build your savings strategy.
How to Calculate FX Costs With a Simple Formula
To calculate your business’ FX costs, you need to determine how much you’re paying above the mid-market rate. You can apply this simple formula to find most costs:
Annual FX Cost (€) = Annual FX Volume (€) × Exchange Rate Markup (%)
You should have details of your business’ trading volume on hand. However, you won’t always know your provider’s exchange rate markup. One option is to use a simple estimate: banks tend to have a markup of 1.50% to 4.00%, which would amount to €18,000 to €48,000 annually for a company trading €300,000 per quarter.
For a more precise result, you can work through the calculation step-by-step using your business’ own spending amounts and rates, as shown below.
A Real Example: €300,000 Per Quarter
Let’s work through an example calculation for a business that handles €300,000 per quarter in FX trading and cross-currency transactions.
Step 1: Calculate Your Annual FX Volume
Determining your annual volume is straightforward. It’s just the amount of money that you move through cross-currency trades and transactions.
Be sure to convert your quarterly volume to annual volume. In this example, we multiply €300,000 by four to get €1.2 million over the year.
Annual FX Volume (€) = €300,000 × 4 = €1,200,000
Step 2: Find Your Bank’s FX Rate
Next, find the exchange rate your bank or FX platform provides. In this example, we’ll assume that your company converted €1.2 million and received about $1.35 million.
That means we need to determine the EUR-USD rate that your bank or FX provider offers. It’s easiest to find the rate on the trading platform itself, but if the bank does not disclose its rates, you may need to calculate it from past transactions.
To calculate the EUR-USD rate manually, follow this formula.
Bank exchange rate = USD received ÷ EUR exchanged
= $1,352,400 ÷ €1,200,000
= 1.127
Step 3: Calculate the Markup
Next, we’ll compare your bank rate to the mid-market or “real” exchange rate. You can find this rate on Google or another reliable source.
Real exchange rate = 1.15
Then, we’ll find the difference between the two numbers and convert it to a percentage:
Exchange rate markup (%) = (Real rate − Bank rate) / Real rate × 100
= (1.15 − 1.127) ÷ 1.15 × 100
= 2.00%
This means the bank markup is 2.00% compared to the “real” or mid-market rate.
Step 4: Calculate Euro Amounts
Using the markup we calculated in the last step, we can now estimate how much you pay due to the bank markup, measured in euros.
Annual FX Cost (€) = Annual FX Volume (€) × Exchange Rate Markup (%)
= €1,200,000 × 2.00%
= €24,000
In this example, you would spend €24,000 per year on FX markups. Again, we emphasize this is an illustration. You should calculate amounts by using your own data and consider adding any other costs that you’re aware of at this step.
Step 5: Calculate Potential Cost Reductions
How much could you save? Your current FX cost is also your maximum theoretical savings if you were to trade at the mid-market rate with no markup or additional fees.
But in reality, you’ll need to settle for partial savings and compare rates offered by different services. Let’s calculate what Payset might offer in costs and savings for the same business handling €300,000 per quarter:
Estimated Payset FX costs (€) = Annual FX Volume (€) × New Markup (%)
= €1,200,000 × 0.40%
= €4,800
Estimated Payset savings (€) = Annual FX Volume (€) × (Old − New Markup (%)) = €1,200,000 × (2.00% − 0.40%)
= €19,200
Payset’s FX calculator makes comparisons easy if you’re paying 2% at your bank — just enter your quarterly volume to get a cost and savings estimate.
Or, get a free assessment by our FX desk: show us your last statement and we’ll show you what it could have cost you with Payset.
Presenting FX Savings in a Board-Ready Slide
Once you’ve calculated your business’ FX costs, prepare a presentation or board FX report. This can help your team understand the costs and potential savings.
This should capture most of the points above, for example:
- Current FX volume: €1.2 million annually (€300,000/quarter)
- Current estimated FX costs: €24,000 annually
- Current FX markup: 2.00%
- Estimated new FX markup: 0.40%
- Estimated new costs: €4,800 annually
- Estimated savings: €19,200 annually
Avoiding Common Calculation Mistakes
It’s important to get an accurate calculation. Here are a few tips:
Don’t Estimate Your Volume on a Single Period
Some businesses have seasonal or fluctuating trading volumes. Consider averaging your volumes over multiple quarters for a normalised estimate, or calculating costs for multiple quarters individually to get a more detailed cost breakdown.
Use FX Rates Taken at the Right Time
FX rates change continually. If you’re working with past data, make sure you’re comparing your bank rate to the mid-market rate from the same time period.
When you’re calculating mid-market rates for an entire quarter, consider using average or median rates for the period. When determining your bank’s rate, try to use a rate that represents the period, even if you don’t have full historical data.
Add In Fixed Transaction Fees
Sometimes, your bank or FX provider charges fees that go beyond the exchange rate markup. If you pay flat fees or per-transaction fees that are separate from the markup, be sure to add those amounts to your final costs at the end of the calculation.
Calculate FX Costs for All Currency Pairs
Currency pairs have different spreads. Frequently traded pairs like EUR-USD often have smaller spreads than less common ones. If you use several different currency pairs, you may need to calculate costs for each of those pairs individually.
What You Should Ask FX Providers
The calculations we described on this page are only an illustration, and they’re mainly useful once you start negotiating with providers or seeking out alternatives.
You might ask these questions to providers that you’re considering:
- Exchange rate margin: How much above the current mid-market exchange rate do you charge on FX trades and transactions?
- Embedded fees: Do you have any fees that aren’t immediately clear?
- Volume discounts: Do you offer lower rates or a tiered pricing system for customers who perform a high volume of trades and transfers?
- FX transparency: Do you show customers the FX rate you charge before each trade or transaction? Do you show them how much currency they’ll receive before the transaction? Are these pre-trade quotes guaranteed?
- Pricing changes: Is your FX pricing model expected to change in the future? How often has it changed in the past?
- Other fees: Do you have other fees not directly related to FX, such as deposit and withdrawal fees, transaction fees, account opening fees, or monthly fees?
How Payset Beats Bank Rates
At Payset, we combat expensive FX markups. We analysed Big-4 banks to find an average baseline rate of 2.00% (typical big-4 EUR/USD FX spread for SMEs. Actual rates vary by bank, corridor, and trade size) — whereas our rates start at just 0.90% and go down to 0.09%, depending on tier.
It’s a two-part plan: our tiered rate system helps you get a rate that fits your volume, based on a rolling cycle that lets you hold onto your rate as long as possible.
How does it work? Your FX rate tier is determined by your rolling volume over the past 90 days. Your tier is locked and guaranteed for 30 days as soon as your volumes qualify. This model means you won’t necessarily lose your tier as soon as you drop below the qualifying volume.
Plus, you can see all of our rates before you start. See our FX page for current FX rates and other details, or reach out to our support team for answers.
FAQ
How do I calculate my company’s real FX cost?
You can calculate your company’s real FX cost using its stated exchange rate — or, if no rate is stated, from the value of the funds that you send and receive. If you’re a Payset user, our calculator can help you estimate your FX costs.
How do I present FX savings to the board without sounding alarmist?
Costs aren’t just something that need to be paid. They also mark room for change. Focus on presenting costs as potential savings opportunities, not just problems to avoid.
What’s a reasonable FX rate to expect above €300,000 per quarter?
There’s no single rate that you should expect, but we believe you can obtain rates better than the 2.00% baseline rate generally offered by Big-4 banks.
According to Payset’s pricing as of publishing (August, 2026) FX volumes of €300,000/quarter would be charged at 0.40% for a total savings of €19,200/year vs the baseline bank rate.
What are Payset’s FX fees for €300,000 per quarter?
For businesses handling €300,000 per quarter, our FX fee was 0.40% at the time of writing. See our FX pricing page for other volumes and current pricing. You can also see our complete pricing page for other service costs.
