An independent study has revealed that small and medium enterprises lose about ten times more money due to unfair fees charged by financial institutions on international payments than the big businesses.
Considering that SMEs have a huge appetite for global expansion, with turnover expected to increase by 129% in three years, this converts to being penalized roughly £775 each year for a small business for thinking globally. This clearly affects the small business margins as banks are less inclined to offer them currency hedging solutions.
Money transfer services costs
While most of us have moved to the electronic mode of payments, few are aware of the costs that are attached with them. While digital payments are gaining traction, over a period of time they can eat into your account balance. If costs are your main concern, there are several inexpensive ways of sending money, with each method depending on your circumstances.
- Banks: While traditional methods of transferring money are available even today, they charge additional fees for the transaction. International wire transfers in American dollars cost around $45.
- Apps: New apps like PayPal make it easy to send money in a matter of minutes for free.The recipient, however, is charged 2.9%+$0.30 per transaction, providing the money is coming from a bank account.
Solutions for SMEs and startups
Over the last few years, innovative startups have infused a lot of transparency into the international transfer process and get a much better deal in the forex market. One such service provider is TransferWise, which has no hidden fees, except for a small upfront charge, making it nearly eight times more cheaper than banks, by saving the payee 4% and the recipient 7% in conversion charges.
Multi-currency accounts features
Another option is opening a multi-currency account for sellers which allows the entrepreneur to receive, pay and hold multiple currencies across a single platform, instead of having to open separate accounts for each currency in the respective currencies. It is ideal for small businesses which are keen to protect themselves from the fluctuations in forex rates, especially US dollars and Euro accounts.
How do multi-currency accounts work?
Just as in an online bank account, a multi-currency transaction allows you to send, receive and withdraw money as per your requirements. There is no need for making a physical visit, as customer support is available on phone or online.
Benefits of multi-currency accounts
There are a number of benefits which distinguishes a multi-currency account from a standard bank account:
- Extremely competitive rates: Apart from saving on maintenance fees for opening separate accounts in different currencies plus a large minimum balance required to open them, you just have to pay a small single account fee to open a multi-currency account.
- Handles forex easily: Another feature to consider is forex management. This account allows you to manage your foreign exchange by moving your balance to another currency. Having the option of a multi-currency account exchange, you can wait till you get the right rate to convert one currency into another.
- Convenience: Multi-currency accounts are easy to open and operate, as there is no juggling with different banks in different jurisdictions.You can access the account from any part of the world digitally and reduce the waiting time with fast settlements.
- Customer satisfaction: Multi-currency allows merchants to display pricing in their own currency, thereby improving customer satisfaction by letting them transact and settle in their own currency.
What are the options?
Money transfer services like PayPal and Western Union allow you to remit money in over 200 countries without having to open a multi-currency account. All you need is to start sending money online or in person from your existing bank account. You get all the amenities without having to open a new account.
Running a small business is not like before. Instead of serving just the community you can reach out to clients anywhere in the world. The only requirement is to make sure you have a good multi-currency accounting software that empowers you to take care of business in any currency.There are plenty of service providers, with millions of customers worldwide with software available in many languages.
How to choose the right provider
An important step is to find a good multi-currency payment processor.This is particularly so for the small businesses who wish to display prices in the customer’s local currency and get paid in their own currency. When looking for the right provider, you need to consider several things:
- Your location: Check out the list of countries your payment processor supports on the website. You would not want your application to get rejected even before you have started.
- Desired currencies: Before you sign on the dotted line,make sure the service provider you have chosen supports all the currencies you need and your funds will be deposited in your account in your preferred currency.
- Multi language checkout: In order to minimize customer frustration it is essential to find a multi-currency payment processor that offers a checkout. This should ideally be in various languages and displayed automatically as per the customers location.