An increasing number of small and mid-sized businesses are turning online with the hope of reaching out to a global audience. In the past, receiving payments from international customers meant having to deal with banks.
Part of the process required paying steep currency exchange fees and getting less than desirable exchange rates. Fortunately, the emergence of good FinTech companies in this realm has ensured that you can make and receive cross-border payments quickly and in a cost effective manner.
The Effect on Exchange Rates
Until not so long ago, only banks, large businesses, and governments had access to institutional foreign exchange market. This changed with the arrival of FinTech companies that now offer their customers bank-beating rates consistently. Some companies such as TransferWise and CurrencyFair rely on peer-to-peer platforms, eliminating banks from the process.
How You Receive Money
Most prominent FinTech companies from this realm give your customers easy means to make payments from different countries and in different currencies. If you don’t want to part with your bank account details, you may work with a company that facilitates receiving payments using no more than email addresses. TransferWise and PayPal let you receive funds using your email address.
Consider this – you sell products to international customers and every time you receive a payment you end up losing some money because of transfer fees and unfavorable exchange rates. With a multicurrency account, you get bank account details from different countries, and the payments you receive go into matching currency accounts.
For example, if you receive a payment in Australian or Canadian dollars, it would go straight to its corresponding account. This way, you avoid paying a currency conversion fee every time you receive a payment in another currency.
TransferWise offers a multicurrency account, as does WorldFirst. Both provide local bank account details from the U.S., the UK, and Europe. In addition, TransferWise provides receiving account details from Australia, whereas WorldFirst adds Canada, China, and Japan to the list. An added advantage with the TransferWise multicurrency account is it lets you hold funds in as many as 28 currencies.
OFX provides receiving account details from Australia, the U.S., the UK, Europe, Hong Kong, and Canada.
You get to decide when you want to withdraw funds from your online multicurrency account to your bank account. This gives you the ability to wait if you feel the market may reach a more favorable level.
Making Cross-Border Payments
Several small and mid-sized businesses need to make payments to overseas suppliers or freelancers. Some FinTech money transfer companies let you make mass payments and you can also find ones that let you set up scheduled transfers.
While paying for your transfers using your bank account is among the most common methods, some companies accept payments via debit and credit cards. Depending on where you live, you can even find companies that accept payments via region specific methods such as iDEAL, POLi, and SOFORT.
Some FinTech money transfer companies let you lock in exchange rates in advance. Some even let you choose from hedging tools such as limit orders and stop loss orders, giving you the ability to make the most of exchange rate fluctuations. A limit order, for instance, lets you specify a desired exchange rate, and the company you work with executes your trade when the market reaches that level.
The global marketplace continues to get more competitive and it is normal for small and mid-sized business to look for new ways to save some money. No matter whether you need make or receive cross-border payments, turning to a FinTech company is a much better idea than using your local bank. You will save time and money, and you can expect a streamlined process too.