Getting to grips with international business payments
At MarketInvoice, we make getting finance quick and easy, so businesses have more time to focus on what’s really important – growth.
For many businesses, growth involves international expansion. This could mean selling internationally, importing from abroad, or even just considering a global opportunity.
But with international expansion comes the need to handle multiple currencies. This can be costly to businesses because of things like currency volatility, foreign transaction charges and differing tax laws across markets.
Fortunately there’s been an influx of innovative fintech providers entering the market to help make international expansion easier for businesses. In particular, by reducing the costs involved with making and receiving international business payments.
The cost of international business payments In 2016, 13% of UK small businesses were engaged in some form of international activity. A study has revealed that UK SMEs were charged £4b in transfer fees when paying for goods, services, and employees overseas by their banks. This international payment cost has risen by almost £1b over the past five years as UK businesses become increasingly global.
Still, the majority of businesses make and receive international payments using traditional methods like their bank. But they might not always be aware of the extra costs they’re being charged on top of the transfer fee.
In addition to the foreign transaction fee, traditional providers will typically give businesses an unfavourable exchange rate which further increases the cost. Even businesses using services other than their bank could be paying 16 times more than they should be.
Fortunately, new players are entering the market to help businesses work across borders. They offer much better exchange rates and charge cheaper foreign transaction fees.
One player focused specifically on international payments is online money transfer platform TransferWise. It was founded in 2011 by the first employee of Skype. Since then, it has been backed by the people behind Virgin, PayPal, Skype, Betfair and Simple.com as well as others including Sir Richard Branson.
Like Marketinvoice, TransferWise is all about making things easier for businesses. They do this by providing a faster, cheaper alternative to making international payments and managing finances overseas.
It’s more than just a money transfer platform. It’s a multi-currency account that lets business pay, get paid, and spend in multiple currencies, without the extra costs you see with more traditional methods. This is because they always convert their customers’ money at the mid-market exchange rate. This is the exchange rate that you’d see on Reuters or Google. Some payment services might give an exchange rate that’s nearly 4% higher. This means that by using TransferWise, a UK business could save over £70 in fees on a £2k payment to a European supplier. The only fee you’ll pay with TransferWise is the small, upfront transfer fee.
Currently more than 3 million people and businesses move over £2b each month with TransferWise. They’re saving more than £2m every day by thinking outside their bank.
When businesses open a TransferWise account, they can get unique local bank account details for the US, Eurozone, UK and Australia. These international account details help remove a real barrier for UK business owners looking to set up overseas banking details. Barriers could include not having a local business address or not being able to visit in person to fill out paperwork. With no monthly charges and no minimum deposit account, TransferWise helps making opening an overseas account more affordable.
Businesses that rely on cross–border commerce or ecommerce retailers selling in multiple currencies could also benefit from having a multi-currency account. The same goes for any business that purchases goods and services in one country and sells them in another. Payments can be received in US dollars, euros, pounds and Australian dollars with zero receiving fees. Over 40 currencies can be held in the one account.
Like a bank, TransferWise is FCA regulated and keeps customer funds separate from their own. The money stays safe and secured in a low-risk financial institution. They are also the first non-bank direct member of the Bank of England’s Faster Payments Scheme (FPS).
It’s easy to open a business account, and costs nothing. The only fees are the upfront charge for each transfer.