The mid-market rate, also known as the interbank rate, is the mid-point between the buy and sell prices of the two currencies – what the buyer is ready to pay and what the vendor is ready to sell for. A genuinely applied mid-market rate is universally recognized to be the most fair and correct foreign currency rate reflecting real-time changes within the currency markets.

Whever there’s a currency exchange, legacy banks would apply a significant “spread” to the mid-market rate. If you’ve ever sent money abroad then it’s likely you’ve been unfairly overcharged.

Mid-market rate and the rate spread

To understand the mid-market rates and how they work, you need to understand what a “spread” is. This spread refers to the margin or difference between the buy and sell rates. For example, let’s say that you’re using UK pound to purchase a Canadian dollar. To get 1 Canadian dollar, you will have to spend 0.59 GBP. But, if you reverse the order around and sell these pounds, you may only receive CAD$0.96. The difference between those two points is called the “spread,” and in this case, that spread is CAD$0.04.

It’s important to know the spread between the buy and sell points, but it’s also important to understand how those two points play into the mid-market rate. So what is the mid-market rate for the example above? You can find out by averaging the buy and sell points ($1.16 + $1.10 / 2 = $1.13). So in this example, the mid-market rate would be $1.13.

Rate margin example:

Right now the GBP to AUD mid-market rate gives us 1 GBP = 1.79 AUD.
If you convert 1,000 GBP you should get 1,790 AUD but instead banks would quote you a much worse rate (approximately 1 GBP = 1.74 AUD), receiving only 1,740 Australian dollars. This seemingly small rate difference and you get 60 dollars less. This is typical for most currency exchange kiosks and banks.

A small spread is justifiable, as any business have expenses, but if you need to transfer money abroad then your goal is to minimize the spread. Fintech platforms have ability to execute trades at the mid-market rate by cutting out intermediation.

Before you make a money transfer make sure to check the mid-market rate (you can Google “1 GBP to AUD”) and check how what’s the rate BUY/SELL rate your bank uses today. Or try wirecompare.com, as we do this pre-work for you, allowing you to get transparent real-time quotes with live mid-market rates and fees charged from top-rated companies to show you upfront the amount you get.

Remember you should be aiming to get the closest possible rate to the mid-market price, which is also called the interbank rate or the real exchange rate that is essentially the point between the buy and sell prices of any two currencies when you’re dealing with currency exchange or money transfer.