This depends vastly. In many cases, the Principal License Holder (PLH) is doing settlement with you in US Dollars only with their Correspondent tie-up. That is to say, they are NOT providing the FX rate.
How does this work? Well, there are three possible solutions to it:
(a). The customer, i.e. the RaaS Client, i.e. you, is not licensed in any part of the world and will be dependent on the PLH’s arrangement that they have for payouts in the various countries you have opted for. In this case, the PLH’s correspondent partner for payout will set the FX rate, and you would have to agree on this (needless to say, you can add your margin on top when you quote to your clients). As the PLH is doing an end-to-end settlement, the rate would be very transparent to you and this rate can vary. Depending on the corridor, the rate could be better than the interbank or mid-market rate, or not.
In most cases, the PLH does not have a say in the rate and they honestly do not care if the rate is Mid-Market, etc. as they make their money on the volume.
(b). In the second scenario, the RaaS Client, i.e. you, may want the solution provider to work with an alternative provider, with whom the solution provider may not have a relationship. Once the relationship is established (between 1-3 months), then you can benefit from the rate. Mid-market rate or the interbank rate is in many cases usually not available, as for that to happen, transaction volume needs to be high. This is not always the written rule, your mileage may vary depending on the corridor and the payout partner you work with.
(c). In the last scenario, as a RaaS client, you are licensed and hence you are providing the FX rate to the PLH. In this case, the rate is 100% transparent to you and the FX gain is yours and yours alone to keep. The PLH has already charged you either on the card processing or the ACH for your transaction.
-  What is the Mid-Market Rate (or the Interbank rate)? Why is it important?
-  Why do prices vary in different markets?
This page was last updated on February 20, 2023.