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The world of currency throws up many interesting and profit making employment
opportunities. With technology easing out the process of handling money
internationally, geographical location seems to matter less and less. One convenient
option is the money changing business.

In today’s global market place, money exchange has a very crucial position and this
is what facilitates easy buying/selling of goods across borders. Also with the rise in
international travel, the need to exchange money is growing and the presence of an
easy money exchanger is being felt increasingly.

The question that confronts us now is how do you capitalize on this opportunity?
For that I think first and foremost we need to get a grip on the basics of the money
exchange business.

What Is A Money Exchange Business?


A business of exchanging currency involves transfer of money from party A to party
B in exchange of another currency of equal value. Some of the most popular money
exchange firms you would hear of include the likes of Western Union and PayPal
apart from the regular banks and travel companies lie Thomas Cook.

This is significantly different from money transfer companies that are involved in
international remittances. You have the option to set up store or conduct business
solely online depending on your preferences and opportunities.

The criterion for starting a money exchange business might vary from state to state
but the starting capital is not huge and you could kick it off with as basic facilities as
a spare room, an additional computer and one internet connection. Even though
there are conditions at certain times about the necessity of having a minimum net
worth and even providing a surety bond, it does not have a limiting role. Rather the
scope and the opportunity gets the required push backed by these conditions.

How to Start A Money Exchange Business?


While the starting capital might not be huge for establishing a money exchange
business, it is one which needs strict adherence to norms and regulations, especially
give the huge amount of money involved.

Decide On A Location

The first and foremost, like all other businesses, involves deciding on a venue to set
up your money exchange business. You should target a location keeping the
customers in perspective, some place that can accessed easily, never too far from
any corner of the town and a place that has the potential to attract maximum clients.
Also the presence of a potential competitor needs to carefully analyzed. Ensure that
you are not competing with too many other money exchangers. Not only would that
rob you off the bargaining position but at the same time in an effort to give a
competitive quote it could even force you to at times compromise on your margins
as well.

Need To Get License & Pay Fees

The money exchange business needs a series of licenses and regulations. Normally
these norms vary from state to state. Not having the required license is considered
to be a criminal violation. Each state has a separate licensing department and
individuals interested in starting this business, need to apply for these and get the
required nod before proceeding any further.

The other associated step is paying up the required fees in this aspect. This again is
a state regulation and dictated by the individual requirements of every state.
Payment of these fees to the right authorities prevents unfair trade practices and
corruption possibilities. Also this helps you conduct your business in a peaceful
manner without disturbances and interruptions resulting from sudden check and
resultant penalty service.

The basic operating procedure involves obtaining a Registration of Money Services


Business application and submitting it to the Financial Crimes Enforcement
Network. This is a standalone agency within the US Treasury Department.

Opening a Merchant Bank Account

With so much of money changing hands, presence of a bank account is almost the
basic requirement. You need to create a merchant bank account in any bank of your
choice. This account helps you in accepting payment, forwarding advances and
paying your customers as per the needs of your business and those you are doing
business with. Also a bank account helps in convenient account keeping and the
chances of unaccounted for payment are significantly cut down as a result of this.

Also with a merchant bank account, you can expand the horizons of your business
quite easily. The bank enables simple transactions over the net regardless of the
time and location and this helps you in providing prompt service to your clients and
thereby enhancing your service efficiency.

Reporting Of Taxes And Record Keeping

Business best practices are what help you in furthering and progressing your money
exchange firm. In this respect paying of taxes on time is very important. The Internal
Revenue Services department in US needs individuals engaged in money exchange
business to report their earnings in dollar terms to the Govt. All the reporting needs
to be done in a fashion that the Govt gets an exact idea of the earnings outlook and
the right amount of tax is levied on it.

Effective tax paying also needs proper record keeping. Maintaining a proper tab of
all the cash inflow and outflow will facilitate this for you. This also limits the scope
of potential money laundering and business malpractices. Whether you maintain a
daily cash sheet or a monthly statement, it depends on your convenience and the
regulations of your reporting state to a lot extent.

Also all fee receipts, bank statements and related records should be maintained for
easy examination by Govt authorities whenever the need arises. Record keeping also
helps in creating good will and credibility about your business.

Understanding the Process

Another key requisite to start of money exchange business is understanding the


business process and its many myriad nitty-gritty. To avoid difficulties while
operating it, you will benefit a lot by spending time understanding the basis before
you take the plunge.

Money exchange needs you to be alert and agile to take advantage of the currency
fluctuation and maximize your margins. Try to look around and create a niche that
helps you to lock in maximum profit while still keeping your customers happy and
giving them a favorable rate. This will help you increase the recall factor for your
firm. When your customers realize that they are getting a better rate, they will go
the extra mile to get their money exchanged from you and also spread the word.
Needless to mention that propaganda through word of mouth is the most effective
ad tools.

Strategies To Further Your Business


Now we reach the next milestone. Once you have established your business, the next
port of call is how to make it profitable and what kind of strategies should you
employ to maximize your returns from it. Like any other business, the ultimate
motive is profit and the effort is to maximize is as best as possible without
compromising on best practices.

Here is a look at what most money exchangers try to do to achieve that goal in a way
that the business turns profitable as well as starts reaping benefits as early as
possible.

1. Need To Have A Plan:

At the very behest it is better to draw a business plan and execute according to this.
For example set the target of customers you plan to cater and fix overseas partners
who will ease out cash flow in other countries. This will also give you a realistic idea
of the exact type of cross border payment requirement and how effectively you can
use your resources towards that end. A plan will also help you get a heads up
upfront about any potential road block you might face and ways to recover.

2. Spot Payment:

This is another effective means to minimize cost, maximize your benefits and ensure
prompt service, especially for small time money exchangers. Spot payment means
you are buying/selling currency at the spot rate or the current rate of exchange.
Relatively smaller payments which are not very regular in nature benefit the most
from these kinds of transactions. This is also helpful if you need to exchange
currency fast. However a prerequisite for this is a provider with low fees. Look for
dealers with a comfortable spread between the sell and buy rate. That will benefit
you the most.

3. Foreign Currency account:

If you have a significantly high transaction in a specific foreign currency, one option
for you could be a foreign currency account. Keeping cash ready in that currency
will give you an edge while dealing with your clients and facilitate quick exchange
service even at a short notice.

Another benefit is this kind of account also limits the need for multiple currency
transfers. This can only mean more savings for you. Lesser transactions surely mean
lesser amount of tax and payment of fees. You can also pass on the benefit of lower
transaction costs to your customers.

4. Benefits of Hedging:

If you thought hedging was only for forex traders then you are seriously mistaken.
Hedging your positions with a forward contract is one of the best ways to preserve
your profits and avoiding the risks of sudden currency fluctuation. A forward
contract is nothing but buying a set of currency at a pre-determined rate. This is
useful especially if the rates turn unfavorable. Given the limited resources of small
businesses, this can help them get a leeway in terms of an insurance against sudden
fluctuation in currency prices. Also it helps you to get an idea of future price trends
and take positions accordingly.

5. Using Currency Option:

The currency option is another forex market tool that can be used effectively by
money exchangers to enhance the bottom-line of their balance sheets. A currency
option is another forward looking tool which sets the projected currency rate for a
future date. The currency option is the record that you get. The best part is the
investor is under no obligation to exercise these options. If the currency rate turns
favorable even before that, all you need to do is take the spot rate and forego the
currency option.

6. Limit Orders:

Buying limit orders can be another great way to boost the returns from your money
exchange business and also it is an effective way to manage your business. This is
also futuristic in approach where you buy a specific currency when the rate hits a
pre-determined target. An account manager will assist you in buying limit order as
an when the currency rate goes and hits the desired target price.

The benefit of this is you get some amount of flexibility in terms of making payment
as the rate is pre-decided but the actual payment happens later.

7. Online Transfer:

Internet has not just eased up the convenience factor in monetary transactions but it
has also helped in cutting down cost of such transaction. Both cash management as
well as payment visibility is enhanced many times through online transactions and
at the same time all of it becomes hassle free. Settlement of invoices with outstation
and overseas client base as well as vendors also becomes relatively simple and easy
to track without any additional expense incurred by either party. Interaction and
payment procedures, especially in case of foreign vendors also become relatively
simple via online method.

8. Look at Settlement in Local Currency:

The idea for any business is maximizing your profit and never lose track of this basic
requirement. Whenever you are settling bills, invoices and expense accounts with
your overseas clients and vendors, go for a settlement procedure in the local
currency. Also making deals with vendors in their local currency will help you
negotiate better for potential discounts and possible deals that would be otherwise
have been impossible if you were making settlement in a standardized currency
with a pre-decided rate.

Concluding
Thus, the trick to running an effective money exchange business is making a strong
plan and executing and implementing the business processes in accordance to that.

Effective and efficient currency exchange is a very lucrative business opportunity


that can yield huge returns if executed with a strong profit motive and a constant
eye on future trends to maximize once exposure in profitable ventures.
Also, do not bother about exchange rates too much. Play it by the ear and take on
opportunity as it comes. At the same time always be alert about the events globally
and how they could potentially impact your business. This will not just help you
boosting profit but also give you a considerable leverage in case the forex market
sees some unfavorable developments.

e can assist you in establishing and maintaining a money remittance business in


Australia. Money remittance is a type of OTC foreign exchange business, where
you (the remitter) are usually considered a product issuer.

Do Money Remitters need an AFSL?


Usually, the answer is yes. This is because an overseas transfer of money
doesn't always occur immediately. There are some exceptions to this rule, but
they are not as common as some people realise. Go to our OTC FX and
Derivatives page for guidance about what FX remitters need to consider from a
set-up and ongoing operation perspective.

The Money Remitters Compliance Forum


We run a face-to-face compliance forum intended for money remitters in both
Melbourne and Sydney. Specifically, it’s for compliance professionals and
Responsible Managers of remittance companies. If you are a compliance or
legal services provider there’s an expectation that you will bring along at least 2
of your clients if you want to come along. The dates of the forum are calendar
events for the Australian Remitters and Currency Providers Association –
become a member here. If you’re interested in attending, contact Paul
Derham to find out more.

Money Remitters and Money Laundering


A key issue with money remittance is the need and effort required to prevent
money laundering. A number of countries including Australia have adopted Anti
Money Laundering (AML) / Counter Terrorism Financing (CTF) regulatory
regimes for remittance providers. Regulatory regimes in this sector are relatively
new and their effectiveness is still being evaluated. These regulatory regimes
are intended to prevent certain kinds of conduct, rather than to protect or foster
the remittance system. The Australian Institute of Criminology has published
information regarding the legalities with money laundering and remitters.

Holley Nethercote can help you examines the operation of alternative remittance
systems in Australia and consider the risks that they entail for illegal movement
of the proceeds of crime and financing of terrorist activities. We can suggest
measures that could be put in place to address these risks and work with you to
ensure that your organisation's operations are not compromised by money
laundering and that your systems remain compliant with the regulatory regimes.
Money Changer Feasib Plan
This chapter presents the summary of findings, which summarizes the five aspects: The
Marketing Aspects, Management Aspect, Technical Aspects, Financial Aspects and
Socio-Economic Aspects. It is important to know about these different categories of each
aspect from the start of the business to normal operation of proposed business. Marketing
Aspect
The services to be offered is faster and reliable way to exchange foreign currency to local
currency and vice versa with a higher exchange rate compare to banks offering the same
service. In that point, it can get the loyalty of the clients and they will continue in
patronizing the service. The business is located at CPN Building at the Public Market and
very much accessible to the target costumers because it’s the busy area of the
municipality. Management Aspect

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The proposed business will be organized as a partnership type of business organization.
The employee will receive basic fixed monthly salary. They will also receive benefits
privileges. Technical Aspect
The materials needed for the operation of the business are office supplies, furniture and
fixtures, office equipment, maintenance supplies, rent expense for the building, expenses
for the renovation, advertising expense and utilities. The target market of ST Money
Changer are the people of Masantol, Pampanga and nearby towns. The proponents chose
the place situated in the CPN Building near at the Public Market of Masantol. Financial
Aspect
The required capital to the business is Php 2,000,000.00 based on the study which the
proposed business is found visible. Some of the expenses that will be involved in the
operation of the business are office supplies, furniture and fixtures, office equipment,
maintenance supplies, rent expense for the building, expenses for the renovation,
advertising expense and utilities. Socio-economic Aspect
ST Money Changer is a new business that will be established in the community of
Masantol Pampanga, thus gives job opportunities to the residents of the said location. In
that case, it also helps the economic status and development of the community. Aside
from its customers who are mostly residents of Masantol The said Money Changer will
be of great help to the students who will conduct a feasibility study similar to this one.
Conclusion
The Marketing aspect is strong in such a way that it can complete with other financial
institution. The Management aspect of ST Money Changer is good most especially in
handling employees. As being a Partnership from organization, the owners will supervise
and Manage the employee’s very well and the business operation as well. Establishing a
Money Changer is profitable and viable. The Financial aspect shows that they had net
profit for the first year and up although it does not have a uniform income and it requires
some of expenses for their operation, still it can get a profit. The establishment of ST
Money Changer has a big contribution in improving the lives of many citizens residing
Masantol, Pampanga Recommendation
In the light of the findings of this study, the following recommendations are hereby
presented: * That the proponents must know their competitors and the services they offer
for benchmarking. * That they must explore new ways of offering services. * That
entrepreneurs must conduct a feasibility study to ensure the viability of the project. They
must conduct a market research and access the needs of the target market.