The world needs fairer, faster payments to encourage trade – and SME growth depends on it

faster payments, Business, The world needs fairer, faster payments to encourage trade - and SME growth depends on it

James Butland, VP, global banking at Airwallex focuses on the guiding light through the challenging economic times for SMEs, and how currency solutions can help businesses thrive in our latest contribution.

The UK economy is built on its hard-working SMEs. 232,000 of them exported goods to overseas markets in 2018, which represents 10 per cent of Britain’s small and medium-sized businesses. Before the pandemic, this figure was continuing to grow.

That’s a lot of business and a lot of foreign exchange. The hope is that before long the SME community will be back making deals and supplying goods and services internationally as the world begins to unlock trade once more.

The trouble is the financial industry needs to better serve Britain’s economic backbone. Whilst the consumer market has fairly recently been disrupted by a range of different challenger brands such as Revolut, Starling Bank, and Monzo to help get them literally more bang for their buck (or Euro, Australian dollar or Chinese yen); SMEs are still being short-changed in all things FX through their reliance on traditional banks. From the complexities in how rates are charged to the lack of transparency of the back-end systems of FX providers, SMEs have received a less than fair deal.

In the dark, doing their best

The European Central Bank released a paper showing how banks across Europe have been earning hundreds of millions of euros each year by overcharging small corporate customers for foreign exchange services. It’s a space crying out for a much greater level of transparency and fairness. As a consequence, there has been a boom in fintech innovation in recent years seeking to improve services for businesses. 

Platforms such as Airwallex strive to help SMEs manage their margins through better visibility of FX rates and charges, and provide an easy way to set up a portfolio of bank accounts in a range of currencies to collect, convert and make payments through. As an example, a UK business working with Airwallex can set-up a local collection account in Australia (with local bank details), buy a product from a Chinese warehouse in CNY, or transfer revenue from the US back to its British based account in GBP – all that same day. This can be done at much lower costs thanks to the fintech focus on cross-border payments that hugely reduces overheads for the benefits of business users.

The relentless focus of fintechs to find new ways to solve market challenges now allow SMEs to access the interbank exchange rate with transparent and low-cost fees. Using a virtual bank account within other markets – such as the Eurozone – also means these businesses are able to act just like a local, reducing the need for other overheads such as establishing their own operations within that market. This is particularly important with Brexit on the horizon at the end of this year (subject to extensions and deals, of course).

Potential economic turmoil impacts SMEs particularly strongly and it’s vital that these businesses get the technology to help them keep afloat in rough seas. Innovations from the payments sector unlock immediate value here, as firms can mind their margins, help unlock markets, and continue to profit and grow.

Setting businesses up to thrive

This year has shown that despite recent events, we live in a global economy. Consumers have found it pretty easy to enjoy the benefits of this system, paying for goods abroad, travelling (before the Coronavirus pandemic), or even transferring money to friends. Yet SMEs have not found this so straightforward. Businesses have often missed out on innovations that consumers have had access to a lot sooner. Cross-border payments for businesses have long been the victim of high-transaction fees, slow, manual processes and reluctance from banks or FX traders to do things differently. But things are changing. As business leaders realise how easy it is for them to make payments on their travels as a consumer, they’re demanding this ease of access when they make business payments.

It’s only right that SMEs get the right access to banking solutions that help them use and access their money wherever they need it to work for them. Likewise, if they can actually see and thereby understand how FX affects their margins they can make better choices. In the long-run, partnerships with fintechs offering international financial services will enable SMEs to not just be tied to their location, opening up boundless opportunities by expanding their options of suppliers and customers and not at the expense of hefty FX charges. This, in turn, will shore up these businesses to new growth opportunities, enabling them to be on the front foot, no matter what challenges lie ahead.


faster payments, Business, The world needs fairer, faster payments to encourage trade - and SME growth depends on it

James Butland

VP of Banking at Airwallex. Experienced Fintech professional with a demonstrated history of working in the financial services industry.