A business that wants to succeed today must think big and act bigger. More and more companies are going global and there is no excuse for your company not to do the same. Surveys indicate that over 58% of small businesses have international customers and this number is growing fast. One also shouldn’t forget about all the advantages that companies can get from dealing with foreign business partners. They can obtain cheaper supplies from abroad or outsource some help from a country with more affordable labor. The point is that doing business internationally can help companies survive in competitive and volatile markets. However, going global isn’t easy, and expensive international payments are one of the biggest problems you’ll face when doing it.
Why Is Making International Payments an Expensive Hassle?
According to Hult International Business School, high currency rates and the absence of universal and efficient international payment methods are two of the biggest challenges businesses that want to go global face. It’s true that banks today allow you to transfer money to any other country that actually has a bank. This means you can send a transfer anywhere in order to pay for supplies or receive payments from your foreign customers.
However, the fact that it’s possible doesn’t mean that it’s usable. Simply put, the system of bank transfers is extremely inefficient. Because of this, many businesses are unable to use it and get the benefits that come with doing international business.
The main issues with bank transfers are:
- High currency exchange rates
- No hedging tools available
- Limited online banking functionality (depending on the bank)
- Long duration of the transfer
- Additional fees (which can be rather high for large-volume transfers)
As you probably already understand, banks require a fortune to run. Therefore, they cannot avoid charging high transaction fees and adding extra for currency transfers. The banking system is extremely complex, so these expenses are justified. In addition, no one can deny the fact that these transfers are extremely secure. Many might find this security worth the extra money they have to pay for the transfer.
The bigger issue with bank transfers is how much of a hassle they are. Not only can transactions take 5-7 days, but they also require a lot of legwork. Many banks do not allow you to make international transfers using their online services. Therefore, you have no choice but to go to the bank and make the transfer in person, unless you are moving money from your account.
However, while you might use your bank accounts to make payments to business partners abroad, any private customers who want to buy from you are unlikely to have this option. The receivers of the transfer face the same problems. You also shouldn’t forget that in some countries even getting to a bank might be a challenge for large parts of the population. Therefore, by using this international payment method you are limiting your business.
The Best Alternative to Bank Money Transfers
Luckily for businesses expanding overseas, there is no need to stick with banks today. Those who are looking for cheap, fast, and convenient international money transfers can choose from a variety of applicable services. Online money transfer companies like Transferwise or Currencies Direct allow for quick, cheap, and efficient transfers.
The main benefit of these services is convenience. They enable you to make and receive transfers using nothing more than a simple app you can install on your smartphone. What’s even better is that the transfer itself is very fast. The exact duration varies due to several factors, but you shouldn’t have to wait for more than a few days. In the majority of cases, the transfer will be nearly instantaneous.
Online money transfer companies also allow you access to a variety of hedging tools. This is a very important consideration for businesses that need to make frequent payments. These tools allow you to secure a favorable currency exchange rate, which means saving even more money. Top companies offer apps that automate this process. Therefore, you won’t have to monitor the changing rates personally. The tech will do this for you and secure the rate when it reaches the pre-defined numbers.
These international money transfer services make payments much easier for people worldwide, especially your customers who want a chance to pay for your products or services fast. However, be sure to research your target audience carefully to determine which of these services will be easier for them to use. Remember that the fact that it’s easily available in your country doesn’t mean that it’s the same for the target country. And if you want to get customers from all over the planet, you need to set up several accounts with different services. This way you will provide maximum convenience to your customers.
How to Choose the Best International Money Transfer Method for You
Money transfer companies available today are extremely versatile, so to choose the best one you need to consider several factors. Considering the fact that the high cost of foreign money transfers (which can go up to 3% FX markup with bank transaction fees on top) is one of the main reasons to not use banks, many people are tempted to choose a company that offers the cheapest service. However, this isn’t the factor you should focus on.
The most important thing to consider is the availability of this service in your target country. Unfortunately, online money transfer companies are only available in several countries, but some of them are able to accept payments from nearly everywhere. Therefore, be sure to find out which services will be most convenient to use in the countries you want to expand the business to.
Another important factor to consider is the availability of hedging tools, like forward contracts. These can help you save a small fortune, especially on large-volume transfers to and from countries with volatile currencies.
As all money transfer companies have rather low fees by default, this should be the least of your concerns when choosing a service.