There are many aspects of life in our society that the average person simply assumes they understand. You have insurance and you can go to the doctor without going into debt right? Simple? You know that when you turn on your computer that electricity makes that possible. Simple? There are lots of these seemingly simple things that we assume we understand because they are so common. Here is another example. We all know that when you go to a store and buy a gallon of milk that you are not simply paying for the milk. The farmer needs to be compensated along with the truck driver the store clerk and any other intermediaries, maybe a body that certifies the quality of the milk or something along those lines. That all gets built into the price for milk. People seem to understand this at least on a surface level that when you buy milk you are paying more than the milk is actually worth so that you do not have to raise cows yourself just to enjoy a bowl of fruit loops. Most consumers do not blink an eye at this kind of pricing but that same concept seems to break down when shifted to another context….. Currency Exchange, money services in general are deeply misunderstood and there is negative stigma associated with the business itself. People tend to dislike what they do not understand and this is certainly one of those cases.
… yes, google is excellent at providing data on all sorts of markets. FOREX is the largest international market out there and these market prices change as a result of thousands of reasons and variables such as geo-politics, market fundamentals, and even pure speculation. In the same way you might google the market price for a barrel of oil you can do the same for currency. I believe this is where the disconnect starts. When you go to the gas station to fill your tank do you pull up the market price for oil and compare it to what the gas station charges? NO!! You don’t. Or at least it would be pretty strange if you did. Why? Because you understand that the gas station is not providing gasoline free of charge at the market rate. They are a business just like any other and they exist to make a profit providing goods and services. In that instance they provide a good ‘oil’ at a markup of about 15%. When you go to a currency exchange you are being provided a good ‘cash’ and the business sells this good at an 8% markup.
If you really think about it just about everything is a store of value. Before we recognized the usefulness of money we used a bartering system and used everything from chickens to cloth as a store of value. Cash is no different it has value because we assign value to it. The value is dictated like other markets by supply and demand.
Humans are notably terrible at making economic decisions particularly when it comes to making logic decisions. Have you ever wondered how clothing retailers can possibly offer 60% year round? Have you noticed that a bottle of water at the mall costs 5$ when the same bottle is 2$ at a grocery store? Does your employer provide a matching contribution to your retirement? Are you one of the millions of people not taking advantage of that obvious economic good? What these questions all have in common is a failure of individual economic actors to behave logically. It is a widely recognized and studied phenomenon. So when your initial impression of the market for currency is based on what google says and you find out that it is actually 8% off that price you almost certainly experience some of this illogical bias against that new price point. If google instead presented the retail rate for currency the same person would not bat an eye at the cost for euros. 8% only seems big if your expectation was based on the market rate. Think for a moment about the last trip you made to the super market. Did you look up the profit margin on that head of lettuce? If for some strange reason you did you would find that it is about 30%. The fact that you expect there to be a markup on goods at a grocery store makes it much easier to stomach a 30%. Logically it does not make sense to spend so much time and effort complaining and criticizing the meager spread on currency if you turn around and buy a backpack for your vacation with a 50$ markup. Does that mean the backpack is bad ? No of course not if you value that backpack more than 50$ than it makes perfect sense. I just hope I am explaining the inconsistency in behavior here.