By Gavan Smythe, Managing Director, iCompareFX
‘Going global’ is an exciting prospect for many businesses. Not only because they can target new markets, but because there is the chance to take advantage of a larger consumer base and gain better access to cost-effective manufacturing resources.
However, it’s not as easy as just shipping product overseas. Businesses must also recognise the hidden costs of international trading, which jeopardise the bottom line of companies both large and small.
Consider eCommerce conversion costs
Global online sellers are subject to extra costs for taking payments from non-domestic cards, plus additional currency conversion costs back to the company’s native (or base) currency. These can sometimes cost up to 9 percent of sales revenue.
A business has the choice of passing these costs on to the customer or to decrease profits in global markets.However, taking the time to review and compare what’s out there puts companies in a better position to choose the right solution.
Providers differ in their offerings, from the regions they operate in, to their fees and exchange rates and even transfer speeds. But those who appreciate trust and transparency may be happy to pay higher costs to work with a provider that offers impeccable customer service and a willingness to help companies navigate the complex currency exchange process.
Remember it’s unlikely a single provider will offer a blanket ‘best solution’ across the global market. Businesses operating in multiple markets might consider using a comparison service or tool to check they’re partnering with the right provider for each currency pair and region.
Don’t forget about gateway fees
Buying online means handing over private card or bank details and, without the right security in place, this can leave customers open to theft and fraud.
That’s why e-commerce payment services include a gateway model, which safeguards transactions by encrypting the cardholder’s details and managing the payment process for the merchant.
However, like any specialist service, merchants pay to keep restricted data protected. Gateway fees are usually calculated as a percentage of the transaction amount. This payment model is useful for SMEs – helping them efficiently scale – but it is also an extra expense most business owners don’t account for.
When choosing a payment gateway service, work with a provider that operates across the same regions and make sure contract terms are checked. Be thorough as some providers charge set-up fees, monthly subscription fees or issue a blanket charge if a minimum volume of transactions isn’t met.
Merchants should decide between a direct or indirect payment gateway. Direct payment gateways permit coherent branding with customised design and copy, but it may cost extra to integrate the service with an existing website.
Manage transnational suppliers
Logistics and legal regulations across the world mean businesses are often required to work with local specialists to deliver their service or offering.
This may mean working with local manufacturers to make commodities in each region or joining with local marketing, PR or advertising professionals to produce culturally sensitive brand awareness in the native language.
In these circumstances, the business becomes the customer. They are obliged to make payments in several currencies as they manage their transnational ventures. For example, UK bank accounts charge relatively large fees to make payments in foreign currencies and these soon add up when running global operations.
This is where multi-currency accounts become rewarding. Not only do they allow businesses to hold multiple currencies – which is ideal for sellers – but they can also send money to other accounts with minimal fees if they’re in the same currency.
Paying suppliers in the same region as their customer base can eliminate double currency changeovers by obtaining payment gateway payouts in the overseas currency and paying out of the multi-currency account in the same currency.
Open a multi-currency account
Opening a multi-currency account helps companies to retrieve the speed and affordable conversion rates required to benefit the most from global trading.
The currency conversion fees linked with these accounts are significantly lower when compared to exchanging currencies via international wire transfers between foreign bank accounts. They’re also quicker and more efficient – allowing businesses immediate access to funds
Specialist money transfer companies that offer multi-currency account solutions offer these services at no monthly cost.
Not all multi-currency account solution providers give access to the same currencies. Furthermore, not all payment gateways support payouts in multiple currencies. Businesses should assess current and future customer and supplier sites to select the most suitable solution provider.
Those who detect these costs and admin fees up-front will be best placed to get the most benefits from the research and comparison stage when comparing providers.