Why Bank and Payment Processors in Pakistan use different US Dollar Conversion Rate?

In the last post, I talked about the conversion rate of US Dollar for users who live in Pakistan and are getting their money from freelance sites via Payoneer Debit Card:

These users wonder why they are getting such lower conversion rate for US Dollar when they are getting their money from the ATM machines using their debit cards. These users are concerned because they can see higher exchange rate for US Dollar in the open market and they wonder why they are getting a conversion rate which is less than the open market rates.

To understand better, I will explain with few examples:

I have been getting my money from AdSense via Western Union for quite some time: the conversion rate used by this payment processor is 2 to 3 rupees less than the rate for which we can convert US Dollar in the open market.

Why is the conversion rate lower when using Western Union?

When we are using Western Union to get our money from AdSense or, let’s say, from freelance site or from someone who lives in another country: then are we getting the money in the foreign currency or in the local currency?

Yes, assume that we are getting our money in the local currency.

But can we get this money in the same currency used by the sender, via Western Union?

No, we cannot.

This money is automatically converted into local currency before you can get it. We cannot ask the Western Union agent to give us our money in the foreign currency: this is not an option.

So as we are not getting our money in the foreign currency, therefore, the applicable conversion rate can be seen in this list:

www (dot) pakremit (dot) com/info_exrates.php

Now, assume that I am getting my money from freelance sites in US Dollars. For this, I need to have a foreign currency account. So assuming that I have a US Dollar account and that I get my money from the freelance site in this account in $s.

Now if I want to convert this money to Pak Rupees, then here is the list for the conversion rate:

www (dot) nbp (dot) com (dot) pk/RateSheet/RateSheet.pdf

In this rate list, you will see that $ has a conversion rate which is quite better than the rate which you can get in the open market.

Moral of this story : )

If you are getting money from a relative who lives in a foreign country or from Freelancing Sites then your best option to get the highest conversion rates is to get it in the foreign currency instead of Pak Rupees: after getting this money, you can convert it into Pak Rupees for a much better exchange rate.