A bureau de change (plural bureaux de change, both ) (
British English
British English (BrE, en-GB, or BE) is, according to Lexico, Oxford Dictionaries, "English language, English as used in Great Britain, as distinct from that used elsewhere". More narrowly, it can refer specifically to the English language in ...
) or currency exchange (
American English
American English, sometimes called United States English or U.S. English, is the set of varieties of the English language native to the United States. English is the most widely spoken language in the United States and in most circumstances i ...
) is a business where people can exchange one
currency
A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins.
A more general ...
for another.
Nomenclature
Although originally
French, the term "bureau de change" is widely used throughout Europe and French-speaking
Canada
Canada is a country in North America. Its ten provinces and three territories extend from the Atlantic Ocean to the Pacific Ocean and northward into the Arctic Ocean, covering over , making it the world's second-largest country by tot ...
, where it is common to find a sign saying "exchange" or "change". Since the adoption of the
euro
The euro ( symbol: €; code: EUR) is the official currency of 19 out of the member states of the European Union (EU). This group of states is known as the eurozone or, officially, the euro area, and includes about 340 million citizens . ...
, many exchange offices have started incorporating its
logotype
A logo (abbreviation of logotype; ) is a graphic mark, emblem, or symbol used to aid and promote public identification and recognition. It may be of an abstract or figurative design or include the text of the name it represents as in a wordm ...
prominently on their
signage
Signage is the design or use of signs and symbols to communicate a message. A signage also means signs ''collectively'' or being considered as a group. The term ''signage'' is documented to have been popularized in 1975 to 1980.
Signs are any ...
.
In the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territori ...
and English-speaking
Canada
Canada is a country in North America. Its ten provinces and three territories extend from the Atlantic Ocean to the Pacific Ocean and northward into the Arctic Ocean, covering over , making it the world's second-largest country by tot ...
the business is described as "currency exchange" and sometimes "money exchange", sometimes with various additions such as "foreign", "desk", "office", "counter", "service", etc.; for example, "foreign currency exchange office".
Location
A bureau de change is often located at a
bank
A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets.
Because ...
, at a
travel agent
A travel agency is a private retailer or public service that provides travel and tourism-related services to the general public on behalf of accommodation or travel suppliers to offer different kinds of travelling packages for each destinati ...
,
airport
An airport is an aerodrome with extended facilities, mostly for commercial air transport. Airports usually consists of a landing area, which comprises an aerially accessible open space including at least one operationally active surfa ...
, main
railway station
Rail transport (also known as train transport) is a means of transport that transfers passengers and goods on wheeled vehicles running on rails, which are incorporated in tracks. In contrast to road transport, where the vehicles run on a prep ...
or large
stores—namely, anywhere there is likely to be a market for people needing to convert currency. They are particularly prominent at travel hubs, although currency can be exchanged in many other ways both legally and
illegally in other venues. Some of the major players include
HSBC,
Travelex
Travelex is a foreign exchange company founded by Lloyd Dorfman and headquartered in Peterborough. Its main businesses are foreign currency exchange, issuing prepaid credit cards for use by travellers, supplying central banks with foreign curre ...
,
JPMorgan Chase & Co.,
Wells Fargo
Wells Fargo & Company is an American multinational financial services company with corporate headquarters in San Francisco, California; operational headquarters in Manhattan; and managerial offices throughout the United States and intern ...
, and
Bank of America
The Bank of America Corporation (often abbreviated BofA or BoA) is an American multinational investment bank and financial services holding company headquartered at the Bank of America Corporate Center in Charlotte, North Carolina. The bank ...
.
Business models
A bureau de change is a business which, in competition with other similar businesses, makes its profit by buying foreign currency and then selling the same currency at a higher
exchange rate. It may also charge
commission or fee on the purchase or sale. In setting its exchange rates, the business would keep an eye on changing market conditions, as well as the rates quoted by competitors, and may be subject to government
foreign exchange control
Foreign exchange controls are various forms of controls imposed by a government on the purchase/sale of foreign currencies by residents, on the purchase/sale of local currency by nonresidents, or the transfers of any currency across national bor ...
s and other regulations.
The exchange rates charged at bureaux are generally related to the
spot price
In finance, a spot contract, spot transaction, or simply spot, is a contract of buying or selling a commodity, security or currency for immediate settlement (payment and delivery) on the spot date, which is normally two business days after the ...
s available for large interbank transactions, and are adjusted to ensure a profit. The rate at which a bureau will buy currency differs from that at which it will sell it; for every currency it trades both will be on display, generally in the shop window.
The bureau sells at a lower rate from that at which it buys. For example, a UK bureau may sell
€
The euro sign () is the currency sign used for the euro, the official currency of the eurozone and unilaterally adopted by Kosovo and Montenegro. The design was presented to the public by the European Commission on 12 December 1996. It consists ...
1.40 for
£1 but buy €1.60 for £1. Quite often the terms "buy" and "sell" are used the other way round by a bureau de change, and the buy rate may seem higher that the sell rate: in such cases, it means "we buy/sell our local currency at the rate showed
(examples from Google Images)
So if the spot price on a particular day is €1.50 to £1, in theory, £2 will buy €3, but in practice this would be hard if not impossible for average consumers to get. If the bureau de change buys £1 from a consumer for €1.40 and then sells £1 for €1.60, the 20 pence difference contributes to expenses and profit.
This business model can be upset by a currency run when there are far more buyers than sellers (or vice versa) because they feel a particular currency is overvalued or undervalued.
The business may also charge a commission on the transaction. Commission is generally charged as a
percentage of the amount to be exchanged, or a fixed fee, or both. Some bureaux do not charge commission but may adjust their offered exchange rates. Some bureaux offer special deals for customers returning unspent foreign currency after a holiday. Bureaux de change rarely buy or sell coins, but sometimes will at a higher
profit margin
Profit margin is a measure of profitability. It is calculated by finding the profit as a percentage of the revenue.
\text = =
There are 3 types of profit margins: gross profit margin, operating profit margin and net profit margin.
* Gross Pro ...
, justifying this by the higher cost of storage and shipping compared with
banknote
A banknote—also called a bill (North American English), paper money, or simply a note—is a type of negotiable promissory note, made by a bank or other licensed authority, payable to the bearer on demand.
Banknotes were originally issued ...
s.
In recent years, together with emergence of online banking, currency exchange services have appeared on the Internet. This new model allows more competitive exchange rates and threatens traditional bricks-and-mortar bureaux de change. Online currency exchange has two main models: the more popular model is provided by an established bureau de change, while social currency exchange platforms such as
WeSwap
WeSwap is a peer-to-peer currency exchange platform. WeSwap matches travellers heading in opposite directions and swaps their travel money directly. The London-based startup company was launched in 2013 by Jared Jesner and Simon Sacerdoti, and c ...
allows participants to ask or bid for currency at their own rates (usually with an additional transaction fee).
The business model of traditional money changers is coming under threat by many new innovative fintech start-ups offering e-wallet foreign exchange alternatives that offer low or no currency exchange transaction fees.
It is estimated that the total revenue of this industry is 362 billion $
Peer-to-peer foreign exchanges
The rise of
peer-to-peer
Peer-to-peer (P2P) computing or networking is a distributed application architecture that partitions tasks or workloads between peers. Peers are equally privileged, equipotent participants in the network. They are said to form a peer-to-peer ...
foreign currency exchange platforms and
FinTech
Fintech, a portmanteau of "financial technology", refers to firms using new technology to compete with traditional financial methods in the delivery of financial services. Artificial intelligence, blockchain, cloud computing, and big data are r ...
has led to disruptive P2P
forex
The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all as ...
platforms that significantly undercuts traditional banks and financial institutions. Providers that use the P2P model to satisfy offsetting currency demands without an intermediary (such as a broker) has result in significant margin and spread compression in the foreign exchange business model.
Consumer issues
Changing money at a bureau is often more expensive than withdrawing it from an
automatic teller machine
An automated teller machine (ATM) or cash machine (in British English) is an electronic telecommunications device that enables customers of financial institutions to perform financial transactions, such as cash withdrawals, deposits, fun ...
at one's destination or paying directly by
debit
Debits and credits in double-entry bookkeeping are entries made in account ledgers to record changes in value resulting from business transactions. A debit entry in an account represents a transfer of value ''to'' that account, and a credit ...
or
credit card
A credit card is a payment card issued to users (cardholders) to enable the cardholder to pay a merchant for goods and services based on the cardholder's accrued debt (i.e., promise to the card issuer to pay them for the amounts plus the o ...
, but this varies depending on the card issuer and the type of account. Fees from multiple ATM withdrawals should also be considered. Some people may feel uncomfortable carrying a lot of cash and so prefer to use a card and carry minimal cash for tipping cabs, hotels, and restaurants. Hotels and rental cars many times also need cards for temporary holds.
Some may also prefer to hold foreign currency rather than change it back if they are expecting to return to where it is used. Companies that frequently send employees abroad may essentially act as their own exchange by reimbursing their employees in the local currency and holding the foreign currency. If exchange rates are relatively stable, the fees charged by a bureau may exceed any likely fluctuation and it also makes the company's
accountancy
Accounting, also known as accountancy, is the measurement, processing, and communication of financial and non financial information about economic entities such as businesses and corporations. Accounting, which has been called the "langua ...
easier.
In the alternate, some prefer to buy their currency before they travel, either just for a sense of security against
credit card fraud typically achieved by tampered card readers or hackers, or because they
speculate
In finance, speculation is the purchase of an asset (a commodity, goods, or real estate) with the hope that it will become more valuable shortly. (It can also refer to short sales in which the speculator hopes for a decline in value.)
Many s ...
the exchange rate is better at that time than it will be when they make their trip. As well, some places may only take cash or have credit card terminals down.
In 2002, many bureaux reported substantial reductions in profit due to the replacement of many European currencies with the euro.
Illegal activity
Bureaux de change offer an opportunity for
money laundering, and a number of countries require bureaux de change to register as
money service businesses and are subject to their
anti-money laundering
Money laundering is the process of concealing the origin of money, obtained from illicit activities such as drug trafficking, corruption, embezzlement or gambling, by converting it into a legitimate source. It is a crime in many jurisdicti ...
measures. The Financial Action Task Force offers a set of recommendations for money services businesses to identify risky customers and transactions, however it is up to the various regulatory authorities to set out the specific regulations that govern the money services businesses in different countries.
See also
*
CLS Group
CLS Group (for Continuous Linked Settlement), or simply CLS, is a specialized financial infrastructure group whose main entity is the New York-based CLS Bank. It started operations in 2002 and operates a unique global multicurrency cash settlemen ...
*
Currency pair
A currency pair is the dyadic quotation of the relative value of a currency unit against the unit of another currency in the foreign exchange market. The currency that is used as the reference is called the counter currency, quote currency, or ...
*
Digital currency exchanger
A cryptocurrency exchange, or a digital currency exchange (DCE), is a business that allows customers to trade cryptocurrencies or digital currencies for other assets, such as conventional fiat money or other digital currencies. Exchanges may acc ...
*
Exchange rate
*
Financial instruments
*
Foreign exchange company
A non-bank foreign exchange company also known as foreign exchange broker or simply forex broker is a company that offers currency exchange and international payments to private individuals and companies. The term is typically used for currency ex ...
*
Foreign exchange market
*
Gold standard
A gold standard is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold. The gold standard was the basis for the international monetary system from the 1870s to the early 1920s, and from the l ...
*
List of international trade topics
This is a list of international trade topics.
* Absolute advantage
* Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
* Asia-Pacific Economic Cooperation (APEC)
* Autarky
* Balance of trade
* Barter
* Bilateral Investm ...
*
Money changer
A money changer is a person or organization whose business is the exchange of coins or currency of one country for that of another. This trade was a predecessor of modern banking.
The advent of paper money in the mid-17th century and the develop ...
*
Money laundering
*
Tables of historical exchange rates to the USD
Listed below is a table of historical exchange rates relative to the U.S. dollar, at present the most widely traded currency in the world.Financial GuidFX FundamentalsRetrieved on July 6, 2007 An exchange rate represents the value of one currenc ...
References
{{Authority control
Currency