Snapshot img

Foreign Exchange Market Size 2025-2029

The foreign exchange market size is forecast to increase by USD 582 billion at a CAGR of 10.6% between 2024 and 2029.

The market continues to evolve, driven by several key trends and challenges. One significant trend is the increasing use of money transfer agencies, venture capital investments, and mutual funds in foreign exchange transactions. The Internet of Things (IoT) and artificial intelligence (AI) revolutionize banking and financial services, enabling real-time personal finance software and content delivery for travelers and businesses. The uncertainty of future exchange rates fuels the demand for 24x7 trading opportunities. As urbanization progresses and digitalization becomes more prevalent, the market is expected to grow, offering numerous opportunities for businesses and investors.

What will be the Size of the Foreign Exchange Market During the Forecast Period?

Request Free Sample

The market, also known as the forex or FX market, is a decentralized global market for the trading of currencies. It facilitates the conversion of one currency into another for various reasons, including international trade, tourism, hedging, speculation, and investment. Participants in this market include financial institutions, non-financial customers, individuals, retailers, corporate institutes, and central banks. Currencies are traded 24 hours a day, five days a week, due to the presence of multiple time zones and the interbank network.
Currency swaps, interest rate differentials, monetary interventions, economic indicators, political developments, and investment flows are some of the key drivers influencing the market. International trade, balance of payments, and economic instability in various countries also significantly impact currency values. Speculation and hedging activities, particularly by corporations and financial institutions, contribute to the volatility of currency rates. The market is increasingly leveraging artificial intelligence and Internet of Things technologies to optimize trading strategies, with mutual funds utilizing these advancements to enhance portfolio performance and manage currency risk more efficiently. The forex market plays a crucial role in facilitating international business transactions and managing risks associated with currency fluctuations.

How is this Foreign Exchange Industry segmented and which is the largest segment?

The industry research report provides comprehensive data (region-wise segment analysis), with forecasts and estimates in 'USD billion' for the period 2025-2029, as well as historical data from 2019-2023 for the following segments.TypeReporting dealersFinancial institutionsNon-financial customersTrade Finance InstrumentsCurrency swapsOutright forward and FX swapsFX optionsCounterpartyReporting DealersOther Financial InstitutionsNon-Financial CustomersGeographyNorth AmericaCanadaUSEuropeGermanyUKAPACChinaIndiaJapanSouth AmericaBrazilMiddle East and Africa

By Type Insights

The reporting dealers segment is estimated to witness significant growth during the forecast period. The market, also known as Forex or FX, is a global financial market where participants buy, sell, and exchange currencies. This market involves various market participants, including financial institutions, non-financial customers, and corporations. Currency swaps, individuals, retailers, corporates, hedge funds, wealth managers, and foreign exchange services are among the key players. The markets facilitate international trade and investment flows, with economic indicators, political developments, inflationary pressures, and interest rate differentials influencing currency values. Monetary interventions, speculation, and risk appetite are also significant factors.
Modern technology and electronic platforms have increased efficiency and accessibility, enabling 24-hour operation. Currency exchange services, monetary policies, and regulations, including those by central banks, impact the market. Economic events, financial crises, and strategic corporate activities can cause volatility. Hedging strategies, accessible platforms, and personal finance considerations are essential for individual investors, small businesses, and multinational corporations dealing with major currency pairs. Online trading platforms and trade balances are crucial for managing currency risks in an increasingly globalized business environment.

Get a glance at the market report of share of various segments Request Free Sample

The Reporting dealers segment was valued at USD 278.60 billion in 2019 and showed a gradual increase during the forecast period.

Currency pairs are the foundation of forex trading, with spot trading being one of the most common methods of buying and selling currencies. Forward contracts and swap deals offer traders the ability to lock in exchange rates for future transactions, managing ris

Description Intro/Summary Wise is a cross-border company that is up about 50% in the last 6 months. Wise has been written up twice on VIC. Originally by Alejo Velez here, and then just over 6 months ago by tyro here (great timing). I’d encourage you to read both for a base overview of the business, I don’t want to repeat them. Another nice intro is ep. 99 of the podcast "Business Breakdowns" where James Revell of TDM Growth Partners explains Wise: Visit Podcast. Wise is a great company, set for steady compounding over the next decade, but how it’s going to grow from an £11 billion company to a potentially £100+ billion company seems to be either unsaid, or sort of hand-wavy. I think Wise is going to compound to a £100 billion company over the next 10 years and here I’d like to explain how. On tyro’s write-up, Coyote got to the heart of the problem in a comment about the true TAM, where they correctly point out that Wise Platform is the theoretical opportunity but it’s currently very small, how is it going to move the needle in the medium term? So far the partnerships seem rather unserious. Quote: I am not saying Wise case won’t work. I am just saying the growth levers are not that crystal clear to me and that management is too vague extrapolating past trends into the future by stating the “Our trillion+ TAM…” The related thing I want to address that I see people do in discussions about Wise is that they point out that banks do the vast majority of cross border payments, and then they don’t really mention banks again. Instead they talk about Western Union, Remitly, Xoom, etc. None of which are banks, and none of which are £100 billion+ companies. Why isn’t anyone talking about the banks? Here I will try to situate Wise against the banks. Insofar as Wise is onboarding customers directly to Wise Retail accounts and Business accounts, £11 billion is a pretty rich valuation even for the medium term. Insofar as Wise gets real traction in the wholesale commercial market, I think it will outgrow that valuation a lot quicker than most expect. But that traction is going to be enormously more “lumpy” than direct signups for Wise accounts for the foreseeable future, even as it accelerates. Also, the pricing and speed Wise brings to the table isn’t a commodity. Insofar as it’s a function of scale, there are a few companies that will be able to match it. But it’s also a function of global regulatory and tech investment that maybe a handful of banking giants + Visa are interested in matching. In order, I’ll try to tackle the TAM, the Banks, and then global currency payment systems. TAM: How Big is the Market? Wise's primary market is cross-border payments. We can think about that market in terms of volume and potential fees, or the take rate, on top of that volume. Volume Wise presents their market as cross-border payments of £2 trillion retail (moved by people), £12 trillion by SMBs, and £13 trillion moved by large enterprises - for a total of £27 trillion of cross border payments. They cite an EDC (Edgar, Dunn & Company) study as the source of these figures. EDC is a payments & fintech consultancy, and that study does not seem to be publicly accessible. There are similar sorts of studies made by at least 2 other outfits: FXC Intelligence and Juniper Research. I'm not paying thousands for these studies, so their methodologies remain a mystery. But I think there are at least a few ways to sanity check these numbers. The first is with the 2022 BIS Triennial Survey (Bank of International Settlements). This survey is widely considered the most authoritative source for a general outline of the FX market. What we want from the survey is the average daily spot volume for non-financial customers, which is ~$150 billion.Annualized with ~250 trading days, you get about $37 trillion in annual volume. Eyeballing the exchange rate of USD to GBP from April 2022, about 0.78, we get approximately £29 trillion. That puts the TAM figure from Wise in the right neighborhood. The next method I found in a paper put out by JP Morgan and Oliver Wyman. They use the sum of global merchandise and commercial services exports reported by the World Trade Organization and foreign direct investment from the UN Conference on Trade and Development to get a figure for cross-border transactions ex-retail. Using the latest data from those sources, I get $32.1 trillion or ~£25 trillion. That matches almost exactly what Wise reports as their market ex-retail. Regarding the retail portion, the World Bank estimates global remittances in 2023 were $857 billion (£672 billion). I assume the main non-remittance component of retail is Consumer to Business payments encompassing everything from international eCommerce to tourism. So far as I can tell, there is no neat aggregate or proxy for the total of this. In terms of volume, I am happy with calling Wise's TAM numbers for cross-border reasonable. Where does that put Wise in terms of penetration? Wise is currently doing about £104 billion retail and £36 billion business in annual volume. That is about 5% penetration for retail and 0.15% for all B2B or 0.3% of what Wise estimates is SMB activity. Wise would appear to have enormous room to grow if they can take share. I think a lot of investors are skeptical that they can take significant share in the B2B space - in the quarter ending March 2024, Business volumes only grew 10% Y/Y. It was very “explainable” - a pause in taking new business customers while they invested in better KYC/UBO onboarding. In the most recently reported quarter, that growth rate is back up to 20%, but a lot of doubts persist. With sub 1% market share, it seems like a world beating company could easily be posting 50% growth rates. Fees There seems to be even less visibility for the fees on that FX volume. There is no trusted triennial survey equivalent and many companies do not disclose what they make in these fees, or even what would count as a fee (Wise would say any premium to the spot rate). In the JP Morgan Oliver Wyman paper about CBDCs they estimate $120 billion in fees for 2020 on $23.5 trillion in transfers, but it excludes "FX costs" which aren't defined and makes assumptions that all this is correspondent banking with a certain number of steps and fees along the way. In Wise's 2022 annual report, Käärmann says c.£180 billion in fees, no source given. One thing that's really apparent in these estimates though, is that if they are even close to the reality, someone is moving a lot of money at a much lower cost than what is accessible to individuals, because these estimates work out to sub 1% fee rates on the total estimated volume. And we know who moves that volume at those better prices: it's the Corporates / Large Enterprises segment through the banks that serve them. These banks do not disclose the fees they make from FX conversions for their customers, even when they provide some commentary around it (we’ll look at that in a minute). Many don’t even disclose what kind of fees they are charging to their customers. Here is language from Bank of America's corporate and commercial deposit account agreement: If we assign an exchange rate to your foreign exchange transaction, that exchange rate will be determined by us in our sole discretion based upon such factors as we determine relevant... and is subject to change at any time without notice. ... We provide all-in pricing for exchange rates. The price provided may include profit, fees, costs, charges or other mark-ups as determined by us in our sole discretion. Those fee's are rolled up into a line item called something like non-interest income or commissions and fees. Our next section is all about the banks, but we can consider what Wise hopes its future looks like in terms of volume and fees. Today Wise's revenue from the volume it handles, or its take rate, is 0.59%. That is £830 million at today's (Q2 2025) annualized volumes. In Wise's Half Year Fiscal 2025 update released in November, CEO Käärman set out a very specific future vision: It’s reasonable to expect that in ten years, someone can transfer $10,000 across currencies for $10, compared to the current banks’ price of $200-$400. We intend Wise to be the one operating these transactions at that price point, with our cost base brought down to $5 or less. It will be profitable and very valuable, when the cross-border volume on our platform is in the trillions. Dreaming with Kristo here for a second, for every trillion in volume Wise would make a billion in fees, and presumably have £500 million in profit before tax. If Wise is moving trillions, they would have a base of a billion or two in pre-tax profit from cross-border revenues. Then we get to ask how much do the complementary services generate and at what cost? Today, 'Card & other revenues' is growing exceptionally fast (~50% Y/Y). It is mostly interchange fees on the issued debit cards. There is also Wise Assets which is growing very quickly: £3.8 billion in assets under custody as of Sept 2024, up from £1.8 billion in Sept 2023. It will likely become a material source of fees in the medium term. These are billion pound businesses at other banks and financial service providers, they certainly can be at Wise. This is just to say that in “theory”, in the dreams of the CEO, IF Wise got trillions in volume, a big “if”, that there can be a few multi-billion complementary services layered in on top. The Banks As businesses grow in size and financial complexity, they generally develop a "treasury" function on their finance team. The treasury function makes sure the business has the money, in the amounts it needs, where it needs them, at the right time for the day to day operations of the business. "Treasury" is the business function that most FX volumes are embedded in. It's simply doing what businesses normally do plus the addition of cross-border:

Number of models with the best conditional coverage property.

Averaged node clustering coefficients of conditional tail risk networks.

MT Newswires offers premium intra-day global markets commentary and breaking news on a wide range of economic, equity, fixed income, energy commodity and FX markets, covering the US, Canada, Europe, and Asia with a focus on the most widely followed securities and events in developed markets and economies. Reports are designed to give the reader a quick and precise picture of the data, while analysts highlight both the immediate impact on the markets as well as the longer run implications for the economy and central bank policy. The Live Briefs Global Markets service is designed to keep a broad range of market participants and wealth managers alerted to market moving events around the globe. o 160 categories of original, real time multi-asset class coverage of equities, treasuries, commodities, options, ETFs and economies throughout the trading and business day; o Global Equities -Significant events affecting individual public companies in Europe, North America and Asia; o Global Economic news and market summaries; o Sector summaries (pre-market, mid-day and closing); o Forex commentary covering the major global currencies; o Energy and precious metal news and daily summaries; o Top News updates throughout each business day; o Earnings estimate changes; o Analyst rating changes; o After Hours and Pre-Market news, trading activity and technical price levels indications; o Market Chatter & Street Color– real time market moving insights from traders and investment professionals globally; o ETF Power Play- Daily trends in ETF trading activity; o Insider Trends – Notable individual and sector related insider trading activity; o Zero noise: Only premium, original news and event analysis. Never any fillers (press releases, non-market related news, etc.)

RMSE of the estimated conditional coverage probability of the forecasted before COVID-19.