I am not familiar with the finance scene. Do currency exchange shop exist solely based on the specialized currency exchange profession?
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Banks don’t carry foreign currency and have to order it. They also charge crazy fees. A storefront won’t have the full variety of currencies that a bank will, but they can have a bunch of different currencies on hand because that’s the point of their existence.
Honestly, I’d think credit cards, which can be used basically anywhere in the world these days, would be what puts currency exchanges out of business, not banks.
Where I’m from, for retail customers, the bank tells you to wait maybe 30-90 mins…while they go find the nearest money changer with good enough rates and they pocket the difference. So in a way, they exist because banks do.
Currency shops aren’t particularly special in the business world or even finance world. I know they seem obscure or strange, but they’re just a buyer and seller of a specific type of good. They could be a cheese exchange shop and nothing would change.
From an outside perspective, you may think currency exchange booths operate in the finance world, but they don’t really do that. People who speculate on currency do that, and some complicated things for holding foreign currency by companies/banks/govts do, but currency exchanges aren’t really investors or speculators, they’re just a shop
Most banks don’t have much physical currency, and really don’t want much physical foreign currency anyways. Thats not the business they are in, its kinda a crappy business and really specialized. They make more money concentrating their efforts elsewhere.
So currency exchange shops fill a niche role. These are not really a “profession” they are just a buyer and seller of goods. The goods happen to be physical currency, but again it doesn’t matter what they sell, only that they kinda have the marketed cornered on it, because its a niche industry that big boys don’t wanna play in too much. Banks have happily conceded they don’t really have much interest to play this game with physical currency, that is highly volatile and low margin.
To ELI5: currency exchange shops survive by offering better rates and better deals than banks; otherwise they may struggle to survive.
I see lots of info here probably from people who operate currency exchange shops.
Most often the exist to scam unwary tourists. They get you by saying Low fees but their rates are terrible.
You would be better served going to a real bank.
My mum was horrified when I just took some local currency out of an ATM while on holiday recently. ‘You will get charged a load by your bank for that’ – not on this account Mum.
‘Well this bank will charge a fees’ – Nope. Not this one or any of these others.
‘Well you must get a terrible rate’ – Nope, its the wholesale rate.
Of course that’s pretty dependant on the country/banks in question, and you do need to do a bit of research.
I think some of them survive because they are in an area with high demand and little waiting.
There is (at least one, maybe not) a guy at the Mexico/Guatemala border that walk around with a fanny pack on that exchanges money for those 2 countries as well as for US currency. He stays in business because it is a high-demand area, he has the cash on him so no waiting, and he is always there.
Currency exchange shops exist because people value convenience. The bank I work at only carries Euros and Canadian Dollars on hand, which is great if you are going somewhere where you would use that, but if you’re going elsewhere, you’d have to order it at least two business days in advance.
You’d think most people planning an international trip would plan for the cash they want on hand, but there are many cases where people come into the bank like the day before. So they end up having to go to currency exchange places that can do it same day, even if it ends up being more expensive.
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