Imagine this — you've just signed a large foreign deal, and your US buyer is wiring you $10,000 for your new batch of handcrafted fabrics. You're already mentally tallying your profit.

But when the funds actually arrive in your account, you find it's much lower than you anticipated. Perplexed, you call your bank — and that's when you learn the bitter truth:

• High conversion charges.

• Unfavourable exchange rates.

• Stealthy transaction fees.

This is happening to tens of thousands of Indian SMEs each day. Your profit gradually disappears during the process of currency conversion — and you don't even notice it.

But what if you could minimise these losses?
What if you could retain more of your profit and still receive international payments effortlessly?
That's what we're going to discuss. By the time you finish this guide, you'll understand how to save on currency conversions, prevent unnecessary charges, and make smarter payment options.

Let's dive in.

What Exactly is Currency Conversion?

In plain terms, currency conversion is the act of converting one nation's currency into another.

Being an Indian exporter, you primarily receive payments in foreign currencies such as USD, EUR, GBP, or AUD. But as your business operates in India, you require that money to be converted into INR (Indian Rupee) so that you can utilise it. This is where currency conversion is used.

Here's a Quick Example:

Let's say you shipped handcrafted jute bags to a US customer. The customer pays you $5,000 USD.

• The exchange rate is $1 = ₹83.

• You should get ₹4,15,000.

But here's what really happens:

• The bank charges a cut (spread) on the exchange rate.

• There are other hidden charges deducted along the way.

• You actually get about ₹4,00,000 or less.

That's a loss of ₹15,000 — just due to currency conversion charges.

How Currency Conversion Fees Impact Your Profit Margins?

Let's now dissect where your money really goes when you exchange foreign payments to INR.

1. Exchange Rate Spread (The Sneaky Cut)

Each time you receive money in a foreign currency, your payment provider or bank doesn't provide you with the true market exchange rate.

For instance, if the true market rate is $1 = ₹83, your bank may give you $1 = ₹81.5.

This exchange rate difference of ₹1.5 per dollar is referred to as the exchange rate spread — and this is where most banks earn their money from your transactions.

So if you receive $10,000, you lose about ₹15,000 without even realising it.

2. Conversion Fees

In addition to the spread, banks tend to charge a currency conversion fee — usually 2-4% of the value of the transaction.

So if your bill is for $10,000, you could end up paying:

• 2% conversion fee: ₹16,600 lost.

• 3% conversion fee: ₹24,900 lost.

• 4% conversion fee: ₹33,200 lost.

The more the transaction, the larger the hidden loss.

3. Miscellaneous Charges

Most payment gateways and banks charge hidden fees such as:

• Transfer fees.

• Service charges.

• Processing fees.

By the time you get your money, most of your profit is already lost.

How to Choose the Right Currency Conversion Method?

Here's the bad news — you don't have to continue losing money. You simply need to select the proper currency conversion method. Let's go through your choices.

Option 1: Banks (Old School Method)

Most exporters use banks to receive international payments, yet it's not the best choice. Banks tend to:

• Provide terrible exchange rates.

• Levy high conversion fees.

• Take longer processing times.

Pros: Easy to use since you already have a bank account.

Cons: High fees, bad exchange rates, and slower payments.

Option 2: Payment Gateways (Such as PayPal, Stripe, etc.)

Payment gateways such as PayPal, Stripe, or Razorpay are popular with Indian exporters for receiving international payments. They still:

• Charge a conversion fee (approximately 2.5-4%).

• Provide lower exchange rates than the market rate.

• Charge international transaction fees.

Pros: Convenient and quick.

Cons: High conversion fees and decreased profit margins.

Option 3: Specialised Currency Conversion Platforms (Such as Infinity)

This is where intelligent exporters succeed. Tools like Infinity's Currency Converter provide:

• True real-time exchange rates with no secret spread.

• Lowest conversion charges.

• Rapid payouts without unwarranted deduction.

So if the market rate is $1 = ₹83, you receive ₹83 per dollar — without parting with any cash to secret charges.

Pros: More money, quicker payments, and transparency in sight.

Cons: None, if you play it smart.

Related Reading: How to Select the Best Payment Gateway for International Transactions.