The Operation of an Exchange Bureau in the Czech Republic

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The Operation of an Exchange Bureau in the Czech Republic

In the Czech Republic, where ‘money changers’ in the days during and just after the end of Communism were regarded with huge suspicion, international foreign exchange companies such as Interchange have had an ongoing battle in some areas of the media and the general public to explain what is, after all, a highly-regulated business.

In every country, there are many different companies operating on the money exchange market, in just the same way as any other service business. These money exchange companies can be anything from one-off operations to major global brands such as Interchange, but all have to be regulated by the National Bank of the country in which it operates, the only exception being, of course, the old style ‘money changers’ that still walk the streets of some cities and are definitely not to be trusted.

Interchange itself is Dutch based with a series of regional headquarters in the main European trading centres’. The group management board, which includes all of the country managers from the countries in which Interchange operates, carry out the day to day management of the global company. It is this management board, that makes the decision to open in new markets. Many of this team have been responsible for building Interchange from its start, when it opened in the Czech Republic and Hungary in 1990. Today it has almost 140 cash exchange offices in 14 different countries, employing over 450 people.

For global companies such as Interchange, the costs of running the business are huge; in just the same way as any other service business, it has to pay rent on its properties (which, of course, need to be in prime locations and therefore demanding prime rents), the heating and electricity in each property, the ongoing secure transportation of funds between its cash offices and the banks, its staff, their taxes, the legal and accounting fees, marketing, etc, etc. And in just the same way as any other service business, it has to buy-in products: i.e. in order to be able to change your money from one currency to another, it has to ‘buy’ the currency from the bank in the first place.

It goes without saying, therefore, that to be able to pay all of these running costs the company needs to have enough income to do that and, ideally, to make some profit (since, of course, money exchange companies are no different to any other service business!). And this is where the whole perceived issue with money exchange companies arises, since unlike banks (who make their profits from providing a range of different services with very high rates of interest (mortgages, etc) and, yes, currency exchange), companies such as Interchange are focused purely on the exchange of currency, which means that every transaction that is carried out needs to include some form of revenue to the company.

If you think about it, there is no other business that is as transparent as a cash exchange bureau, which publishes the price that it will buy currency and the price at which it will sell it for everyone to see. Let’s face it, you don’t walk up to a convenience store and see a list of what it is selling and the price that it paid its supplier for each item. Imagine how that would work! And even if it did, would the customer expect to buy the item for the same or similar price and, having done a rough calculation, call the police if he guessed that the profit charged is xxx%? Of course not. But unfortunately that is what can happen with an exchange bureau.

Having said that, highly regulated companies such as Interchange will sell currency for as near to the ‘buy’ rate as they can on any given day, but since the margins are so low (particularly in the tourist destinations where very small amounts of money are usually exchanged), they also need to charge an additional fee (or commission, as it is sometimes called) for offering the service in the first place. This fee is usually a percentage of the currency exchanged, which means that if the amount is relatively small, the amount of ‘income’ to the company is as well; hence why lower rates are usually agreed when the amounts being changed are larger.

There are other factors that need to be taken into account by the company (and the customer) when these fees are calculated; quite often the fees will be higher in the most popular areas as the running costs are also much higher (consider, for example, the rents on Prague’s Old Town Square compared to those in the outer areas of the city) or in those offices that are operating 24 hours a day (again, consider the salaries and costs that are required to keep the offices open throughout the night), but that is no different to any other business (consider the price of a coffee on Prague’s Old Town Square compared to those in the outer areas of the city, or those in the discount stores such as Lidl and convenience stores like Žabka).

Companies such as Interchange are continually looking at ways to give its customers a better deal whilst, at the same time, staying economically stable and profitable. One of its recent innovations is to offer customers the ability to book their currency online (through its local websites) and avoid the need to pay a fee at all…again, just like any other modern business, we are trying to move with the times and offer our best deals online.