Managing and hedging

Limits may apply to payments and FX transactions depending on factors such as the currency, transaction type, account and product being used.

You can view the hedging limits that apply to your account or speak to the Alt21 team if you’re planning a larger payment or FX transaction.

Alt21 is an alternative option for UK businesses looking for a hedging-focused alternative to Wise. It offers spot FX, forward contracts, FX options and structured products. Pricing is transparent in real time. Ebury is another alternative option, particularly for larger businesses that want dedicated relationship management alongside their hedging tools. For a full comparison of providers, see our guide to the best Wise Business alternatives for UK companies.

A forward contract is a mandatory obligation to trade. An FX option gives you the right but not the obligation to trade. Options allow you to benefit from favourable market moves, but they require an upfront, non-refundable premium

Spot FX converts currency at today’s market rate for near-immediate settlement. A Forward contract lets you agree a rate today for a currency conversion that will settle on a specific future date.

Using a forward is generally a hedging activity intended to reduce currency exposure. Whether a particular use is appropriate will depend on the business purpose and the underlying exposure.

Most SMEs use forwards for periods between one month and one year. However, some specialist providers can offer tenors of up to ten years for very long-term projects

A forward may require an initial margin deposit or other security. How much this is, is dependant on the provider and the size and tenor of the trade

Yes, but a forward is a legal obligation. If you no longer need the currency, the contract must be closed out at the current market rate. If the market has moved against you, there may be a cost to cancel the contract, known as a mark-to-market loss.

While there is no strict minimum, hedging generally becomes a priority when a 3% to 5% move in exchange rates would significantly impact your profit margins. For most UK businesses, this point is usually reached when annual FX volume exceeds £200,000. Below this level, the risk may be manageable with simple spot transfers, but above it, the hidden costs of being unhedged start to compound quickly.

The main difference is obligation. A forward contract is a legal obligation to trade at the set rate on a set date. An FX option gives you the right, but not the obligation, to trade at that rate. For this flexibility, you pay an upfront, non-refundable premium. If the market rate is better than your option rate at the time of settlement, you can let the option lapse and trade at the better market rate.

A forward contract does not “save” money by beating the market; it saves money by removing uncertainty. It allows you to lock in an exchange rate today for a payment you need to make in the future. This means that even if the currency market crashes before your invoice is due, your cost is already fixed at the agreed rate, protecting your profit margins from volatility.

However, it’s important to note,, if the market moves in your favour before settlement, you remain obligated to transact at the agreed rate and will not benefit from the improvement.

There is no universal threshold, but a practical indicator is when a 3 to 5 per cent adverse move in your primary currency pair would have a meaningful effect on your margins or cash flow. For many UK businesses with international suppliers or customers, this applies from around £200,000 to £300,000 in annual FX volume. The cost of a forward contract or option premium is typically modest relative to the exposure being managed.

This is of course, illustrative only. The appropriate level at which to begin a hedging programme depends on your individual business circumstances, including your margin structure, currency pair and risk appetite. You should consider seeking independent financial advice before entering into any hedging product.

For a provider offering forward contracts or FX options, check that they hold full FCA authorisation as both an investment firm and a payment institution under UK regulation. A provider authorised only as a payment institution can handle payments but is not authorised to offer derivatives. You can verify a firm’s permissions on the FCA Financial Services Register.

Payment Approvals adds an admin sign-off step to the payment process. Any user or third-party agent can set up a payment within the platform, but it will not be processed until a team member with admin privileges reviews and approves it. The admin receives an email notification and can approve or reject the payment before it goes through. This lets you give broader payment access to your team without removing oversight.

Alt21 integrates with Xero. Trades and settlements sync automatically, which keeps your records current without manual entry and makes period-end reconciliation more straightforward.

A broker can offer some of the same instruments including forwards, options and structured products, but the model is different. With a broker, you typically call or message to execute trades, pricing is relationship-dependent rather than shown transparently upfront and your ability to manage positions independently is more limited. A self-service platform gives you control, visibility and the ability to act when the market moves without waiting for a response.

A treasury management system (TMS) is a broad category of enterprise software covering cash management, debt, investments and risk across the whole balance sheet. They are expensive, complex to implement and built for large corporate finance functions. An FX hedging platform is focused specifically on currency risk: booking forwards, managing options, tracking exposure. For most UK SMEs, a purpose-built hedging platform is a more practical fit than a full TMS.

An FX option gives your business the right, but not the obligation, to exchange currency at an agreed rate on or before a set date. For that right, you pay a premium upfront, which depends on the size of transaction and market premium at the time. If the market moves against you, you exercise the option and your agreed rate protects you. If it moves in your favour, you let the option lapse and take the better market rate instead. That flexibility is what sets options apart from forward contracts, which lock you in completely. Options suit businesses that want a defined minimum exchange rate without giving up all of the upside. The premium you pay for an FX option is not refundable, regardless of whether you exercise the option. More complex products such as participating forwards and ratio forwards have additional features and risks you should take independent advice on as to whether this is right for your circumstances

A forward contract lets you lock in an exchange rate today for a currency conversion that will happen at a future date. If you know you need to pay €500,000 to a German supplier in three months, a forward contract means you agree the rate now, regardless of where the market moves between now and then. This turns an uncertain future cost into a predictable one, which is extremely useful for budgeting and margin management. A forward contract is a binding commitment. You will be required to complete the transaction at the agreed rate at maturity, even if the market has moved in your favour by that point. Forward contracts are regulated financial instruments and are subject to our standard terms and conditions.

You can convert FX instantly, or lock in rates on future FX transactions via Hedging. You can set limit orders for conversions and roll trades automatically all from one platform. 

If it’s a Spot trade, your rate is fixed the moment you confirm. With a Forward, your future rate is locked, giving you protection but also with an obligation to exchange in the future.

You can deposit collateral to get access to the most competitive rates. We will consider deposit-free hedging for businesses in the UK and EU; we’ll agree fair, transparent terms upfront visible in your dashboard. Our machine learning models make almost instant credit decisions to get you up and running in minutes, and that can save you lots of time versus a traditional bank or broker.