This article is by Simon Hughes – Director, Head of 360 trading at IFX Payments
This September, the Premier League closed on what has been a record-breaking summer transfer window. The total spend amounted to a huge €2.25bn (£1.94bn), which is more than La Liga, Serie A, the Bundesliga and Ligue 1 spending combined.
However, many football enthusiasts are unaware of the role that payments and FX partners play during this time period. Their job is essential to ensure that record breaking sum doesn’t get lost in the mix and in the long term the football season can continue without a hitch.
The role of Cross Border Payments
The process of cross border payments actually kickstarts once any club transfer has been signed off. More often than not clubs choose to defer the full amount of a player, opting to split the amount into stage payments made over a period of time.
With such large sums on the table, for many clubs, the 2022 transfer market was one of the most buoyant in terms of payments and FX. But the rewards of using a payments partner speak for themselves when it comes to the knowledge and guidance they can provide to navigate this turbulent time.
Despite this, some clubs are unaware of such benefits FX specialists can provide and opt to transfer with their banks without realising the money which they are unnecessarily wasting. A payments and FX partner’s role is to minimise the wide margins made by the banks and return it to the club in commercial spend, ultimately leading the club to reap the benefits of both competitive exchange rates and a commercial partner.
The Risks of the Transfer
There are of course risks with any transfer exchange. Generally these risks fall largely to the ‘buying’ club, especially when transferring in stage payments. For example with a €60 million Euro transaction divided and paid in staggered €20 million sums throughout the year, a 5% move in the exchange from one payment to another would result in a €1 million EUR equivalent in additional costs. The chance of such fluctuation in costs is a worry for a lot of clubs but something, given the volatility of the market, that is often unpredictable.
There can also be equal risk if a ‘selling’ team chooses to buy a replacement player from a club who asks for full payment upfront. In this case they may choose to ‘borrow’ money from the club they just sold to against the stage payments they are due, allowing them to fund the upfront payment for their new transfer target. This can be risky, opening up the club to further fluctuations in rates and potentially further additional costs.