Nifty buyback option

TRAVEL & FOREX

Going overseas? The biggest headache is how much foreign exchange to carry, and in which denomination. Outbound travellers usually work on guesstimates, either taking too much foreign exchange or too less, and then having to resort to buying more from overseas at higher exchange rates.

What happens inevitably is that the traveller ends up a loser returning home with dollars or euros he's not likely to use for some time.

Of course, he has the option to exchange the foreign currency back into Indian rupees, but it is more than likely that he could be badly hit by the exchange rate risk. He could have bought dollars at 48, but by the time he returns from his trip the exchange rate down to 46.

"Invariably travellers tend to lose five to six per cent when they surrender their unused foreign currency to banks or moneychangers," said Travelex Worldwide Money group director commercial foreign exchange & managing director India, Yogesh Shetty.

Alternatively, one might choose to make payments using a credit card. But where is the transparency? Does one know what is the exchange rate at which one is being billed until one comes back home and gets his card statement?

On presentation of a hotel bill for example, which of course would be in dollars or euro, one offers to pay using one's credit card. This is swiped, the bill is paid, but the credit cardholder has no clue at what exchange rate the deal was struck. It's only on seeing the credit card statement that one realises the exchange rate might not have been favourable after all.

This is obvious that exchanging currency is best NOT undertaken at the hotel desk counters, where rates are not favourable. So what's the remedy? Travelex, the world's largest foreign exchange specialist, offers to buyback one's foreign currency at the same price at which the traveller bought it from the foreign exchange retail outlets.

Christened Buy back Plus, Travelex is the only agency offering this product. Banks and other foreign exchange dealers do not promise to buy back any currency at any pre-determined rate. Customers of Travelex can return the currency bought from the agency within 31 days of buying the same.

This also includes buying back traveller's cheques at the same rate at which they were purchased, free of commission. The only charge is a small fee of Rs 100, which insures against the customer taking any exchange risk.

At the same time, there's no compulsion on the customer to return the unused exchange back to Travelex. Should the exchange rate favour him after a month of availing the same, he has the option to go to any bank and surrender the same at the prevailing exchange rate.

So how does Travelex afford to give this assurance in the form of a buyback? How does it hedge the exchange rate risk?

Says Shetty: "Travelex buys and sells foreign exchange because of its global business across 90 countries in 650 locations including 40 international airports. Whatever we buy, we also sell and thereby this gives us a natural hedge in terms of the global business. This enables us to absorb the market volatility."

It is not that Travelex is charging a higher commission to offer this product. "With the competition, and there no longer being a parallel market, rates have become transparent," says Shetty. It is a volume game and the idea is to give value addition.

Travelex sees the foreign currency business as bringing in big bucks. Its achievements in six months of launch have exceeded expectations. "We have become profitable as we have tied up with corporates and have decided to tap the supply chain," says Travelex (India) CEO Gavin Azavedo.

The Buy Back Plus product is available across the four metros "" Mumbai, New Delhi, Chennai and Bangalore. About 10 per cent of Travelex customers have come back with their unused foreign currency.

Others may not have opted to do so, but they at least have that assurance that they can. Calendar year 2004 will see more than 4.5 million Indian outbound travellers, and foreign currency forms an integral element in foreign travel.