Will Banks’ Multi-currency Accounts replace traditional Money Changers?

8 May 2018

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Mention the words “Money Changer” and I bet that the image that almost immediately conjures up in your mind is crowds of people surrounding small and modestly renovated shops in The Arcade at Raffles Place to check exchange rates (mostly trying to decipher the complex Buy/Sell rates with different units of currency measurement) and transacting with the traditional brick-and-mortar money changers in quick split-seconds or risk getting the “polite” requests to move aside for the next customer to transact.

It’s interesting that we are now less than two years away from year 2020 and yet the most common behavior and process of changing money seems to be stuck in the 70s (or even earlier) even though new Financial Technology (“Fintech”) startups such as MoolahGo (www.moolahgo.com) have emerged to offer more convenient, safer and cheaper approaches to changing money. If you are curious about how such Fintech startups work, you might be interested to read our previous article titled “What is Peer-to-Peer Currency Exchange” at this link.

In this article, however, we will discuss a relatively new product offered by banks in Singapore which provides another approach for consumers to change their money. This is the Multi-currency Account.

What are Multi-currency Accounts that are offered by Banks?

The simplest explanation is that these are basically bank accounts that allow you to store foreign currencies besides your regular Singapore Dollar Account.

As at this writing, based on our knowledge, DBS, UOB and Citibank seem to be the banks in Singapore that are actively advertising such a product, although we are quite sure that the other banks would also have similar products.

DBS Bank calls this product simply the Multi-Currency Account or in short, the MCA.  UOB calls theirs the Mighty FX whereas Citibank calls it the Global Foreign Currency Account.  For simplicity, in this article, we shall refer to this product under its general name, the multi-currency account.

The detailed workings of such products may differ from bank to bank, but in general, here’s how they typically work:

How do you use Multi-currency Accounts as Travel Money?

We briefly mentioned in the last section that prior to using your multi-currency account, you have to first buy the required foreign currencies. Now let’s delve down further into this purchase process.

Some banks treat this process as a Foreign Exchange trade whereby the user needs to specifically state the amount and exchange rate.  Other banks treat it as an internal transfer from the base Singapore Dollar account to the foreign currency account of the user.  Whichever process is used by the bank, the outcome is exactly the same, which is that your Singapore Dollar base account will be deducted for the amount required to convert into the foreign currency based on an exchange rate quoted by the banks.

The process of buying or transferring foreign currencies is typically performed within the internet banking website or mobile application of the banks.

When the purchase has been completed successfully, the foreign currency amount will be credited into relevant foreign currency “purse” of your multi-currency account.

Now that you have your required foreign currencies, it would seem that you are all set for your trip. But hang on, you are not quite there yet…

Having your foreign currencies in the multi-currency account is just one step. The other step is to have a Debit Card from the bank and link the card account to your multi-currency account so that you could access the right foreign currency purse for your purchases or withdrawals in the foreign countries.

This process of debit card issuance and linkage also varies from bank to bank. For example, DBS Bank allows its regular ATM debit cards to be linked to its multi-currency account. UOB and Citibank on the other hand, require specialized debit cards to be issued for linkage to their multi-currency accounts.

Once you have your debit card and linked it, you are now ready for your travel.

When you are in the destination country, it is very easy to use your foreign currency.  As the debit cards are usually linked to either the Visa or Mastercard network, you can use the cards at any merchant that accepts these payment methods just like any other credit cards.  The difference, however, is that you can only make transactions up to the available balance that you have funded for the specific currency.  Some banks do, however, allow you to go into overdraft if your transaction amount exceeds your available balance.  You do need to be careful about this as overdraft interest charges are usually very high.

When your balance runs low, you can also buy more of the required foreign currencies by accessing your internet or mobile banking app while you are travelling.

What are the main benefits typically touted by these Banks?

Benefit #1 – Competitive Exchange Rates

This is usually the main benefit advertised by the banks that are offering multi-currency account products. To understand the extent of “competitiveness” of the exchange rates offered by these banks, we have done a comparison of a sample set of exchange rates offered by the banks, money changer and the mid-market rate as below.

Notes:

While it may be hard to draw a concrete conclusion on the competitiveness and benefits of exchange rates offered based on above assessment, it does pose a question if exchange rates that consumers get on such products are in fact really “competitive”.

Benefit #2 – Safer

I am sure that we have all heard of too many stories about travelers losing their travel cash through misplacements, hotel room theft, pick-pockets and even theft during flights (yes, they do happen!).

Unfortunately, carrying physical cash poses such risks.  Therefore, the safety aspect of using a multi-currency account for travels is one that is very valid and should not be ignored.

Benefit #3 – Convenience

Convenience is another benefit of using a multi-currency account for travel purposes. Convenience comes in two main ways:

1. No more queuing at money changers.
   
   Let’s face it! Who likes queuing at the money changers at The Arcade?  Not us, and probably not you!  Having a multi-currency account which allows you to convert currencies at any time you want without having to physically queue up is as if you have your own money changer on the go with you at all times (in fact, one of the banks that advertises its multi-currency account uses the slogan “money changer in your pocket” as its tag line!)
    
2. Buy more foreign currencies while travelling.
   
   It is also very common that we run out of foreign currencies in the middle of our trip. Or we are so concerned of running out and to prevent that, we charge most purchases to our credit cards. In the end, we end up with unused foreign currency cash at the end of the trip which may get forgotten and lost or lose its value due to exchange rate fluctuations.
   
   This is where a multi-currency account could help buy allowing you to convert to the required foreign currencies if you happen to have depleted your previous balance during your trip.

So should you stop going to traditional money changers?

Multi-currency Accounts do help to make the money changing process more efficient but you would probably not totally stop going to traditional money changers from now. Here are a few reasons why:

1. Looking at the exchange rate analysis above, you would have probably concluded that the exchange rates available with the banks’ multi-currency accounts may not always be the best rates.  At times, you could in fact find better rates from the traditional money changers.
    
2. Multi-currency Accounts are useful for the major currencies like US Dollar, Japanese Yen, etc. However, not all currencies are available so you would still need to make a visit to money changer shops to get the currencies that you need.
    
3. Not all merchants abroad accept Visa or Mastercard Debit cards so you would still need physical cash. Yes, you could withdraw cash using your debit card at the ATM machines, but there are charges (usually between $3-5 per withdrawal regardless of amount) levied if you are withdrawing from ATMs not associated with the bank that had issued your debit card.

Look out for the upcoming MoolahGo Multi-currency eWallet (“MCW”)

MoolahGo is currently developing its Multi-currency eWallet which it claims would provide added convenience and benefits to its members through enhanced functionalities. Like the multi-currency accounts of the banks, MoolahGo’s MCW allows users to hold multiple currencies of their choice. But unlike these banks, the MCW is also intended to be a versatile mobile payment facility.

MoolahGo is intentionally keeping a tight lid over its plans for its Multi-currency eWallet product. Barring any unforeseen circumstances, MoolahGo currently plans to roll out this product in Q3 2018.  However, due to high interests and frequent enquiries, the company has already started pre-registration from the public from 1^st May 2018.

How do I Pre-Register?

Pre-Registration is FREE.  Anyone who pre-registers before the launch of the product will be entitled to attractive privileges such as free gifts, fee waivers and preferential rates.

To Pre-Register, please drop us a note via our Contact Us page with the follow message: “Can’t wait for your multi-currency e-wallet, please pre-register me!”.

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