Foreign exchange can be a great addition to your business from a commission perspective but what should you consider if you are thinking of setting it up? Abigail Healy assesses the pros and cons.
Foreign exchange is a commission booster for many agents and can even be a great marketing tool for attracting new customers.
Yet with stories occasionally cropping up about agencies that have experienced security issues, there can be valid concerns around safety.
Then questions of regulation and supplier partners surface and it can all begin to seem quite onerous. However, Lisa Henning, group membership services director at the Travel Network Group, says agents should offer forex for two reasons.
“One: to protect your business – if clients can’t get their currency from you they’ll go somewhere else, which could risk you losing a client. Two: to help your business grow – if you offer excellent service via forex, that customer might well return and book a holiday with you next time.”
And if you need any more persuasion, Stephen Eccles, travel money sales & operations manager at Midcounties Co-operative Travel, says that the business has “a few branches that transact more in forex than they do in holiday sales.”
“You don’t have to have a full bureau if space or cost is an issue but you do need a safe so the money can be kept locked away at all times,” says Henning.
Natalie Turner, head of branches at Midcounties Co-operative Travel, adds that you need to ensure you meet any security specifications that your business insurance provider requires, such as the type of locks you use, doors fitted and security glass where a bureau is installed.
She also highlights the importance of considering how the agency banks and safe content cover, adding: “Consider security collections and deliveries, or where staff have to walk to the bank – what procedure is in place to support their safety?”
Anth Mooney, managing director at Thomas Cook Money, says that developments in technology have made offering forex more secure, as agents can offer click and collect services meaning they don’t necessarily have to keep lots of cash on site.
“If you operate on a more digital basis, where the customer asks you the day before if they can come in and collect €500, for example, then you can make sure that’s available for them in a package.”
Henning advises agencies to be discerning when selecting a forex supplier partner. “Look at the rates they offer but remember they also charge for postage so don’t be fooled by delivery fees. Also consider how long delivery takes. We work on an ‘order today, deliver tomorrow’ basis for example.”
Different suppliers offer different pricing, some of which can seem more appealing from a commission perspective than others. Mooney advises taking care to strike the right balance.
“Make sure your customer is getting a fair deal but that it works commercially because there is a cost attached to doing this kind of business and fulfilling those regulatory obligations.”
Nicola Loftus, operations manager for Hays Travel, which offers a forex service in its own branches and to third-party agents, says agents should watch out for providers that ask to be paid upfront for currencies, as this could expose them to the risk of exchange rate fluctuations.
To set your business up to offer forex, from a regulatory perspective you must undergo a ‘fit and proper’ test with HMRC as well as registering for the anti-money laundering scheme. For more detailed guidance on anti-money laundering guidelines, see gov.uk.
Mooney also highlights the importance of ensuring you have a process in place to avoid any claims of money laundering.
“You have to demonstrate that you know the customer and that you can prove that there has been no money laundering; that there’s no fraud and that the customer is who they say they are.
“It is not that complicated or onerous but there needs to be consistency around that process, and you need to be able to demonstrate to a regulator that you’ve got adequate controls, monitoring and staff training in place, and be able prove staff competency.”
Once the practicalities are sorted, your next consideration is how you are going to promote your services to clients.
Henning advises agents to be pre-emptive. “In the five Worldchoice stores that we at TTNG own, we naturally reserve currency for clients who have booked with us. We tell them their tickets are ready and we have already reserved £500 of currency for them and ask: ‘Is that enough’?
“We have really high conversion rates on forex by doing it this way – more than 70% of booked clients take our foreign exchange too.” Of course, local competition is a key factor. Henning adds: “It’s important to keep on top of it – for example, we offer deals such as ‘Senior Citizens Fridays’ and often promote more “weird and wonderful” currencies, as not many others keep them in stock.”
Midcounties Co-operative Travel has similar offers such as senior citizen rates, student rates and happy hours.
Turner says: “It’s about testing what works in your town.”
She adds that competition is getting tougher all the time with the likes of WHSmith, supermarkets and even jewellery stores offering forex now. However, as a holiday provider, agents are perfectly placed to gain plenty of business.
“We have a customer journey framework that our staff follow. They include forex as part of the initial conversation, as we offer a VIP rate for customers who have booked their travel with us. It is also mentioned when customers pay their balance and when they collect their tickets.”
Eccles says that Midcounties branches push their forex services on Facebook and Twitter, include information about it in customer documentation and make it a focus in the window. “From May onwards, we treat it like we treat holiday sales in January,” he says.
He adds that you need to keep on top of market trends. For example, with Turkey picking up in popularity this year, it’s important to have plenty of lira in stock.
Finally, Turner highlights the opportunities that agents can find by thinking strategically.
“Schools tend to book group trips through specialist providers, for example, but they need currency, so you could promote your services to parents.”
Eccles adds: “Big sporting events are another great opportunity. When the Fifa World Cup was on, it was good to have that in the window. People who might have booked via a sporting specialist are then aware they can get their currency from you – it generates footfall and provides a chance to remind them that you could book their travel in future.”
“We used to offer forex in our previous store but only from a desk and it didn’t work too well. When we moved to new premises last November, the store was about three times the size so we installed a physical bureau with a whiteboard in the shop window. Since then our forex business has trebled in size.
We still have all the local competition, but having the actual bureau has made all the difference. We offer competitive rates and even better ones for clients who book their holiday with us. The staff will contact a client two weeks before their tickets are due in and ask if they’d like currency set aside for when they collect them. It feels like a special part of the service.
It’s also brought in new customers who have ended up converting into bookings and we’ve had enquiries in for 2019 too.
From a security perspective, you need to look out for scammers. Beware people who ask you to change currencies mid-transaction, for example, and if customers are using a debit card, get them to put in their PIN rather than using contactless.
But overall my advice would be open a bureau if you don’t already have one – it’s well worth it.”