The world is becoming increasingly connected and businesses are expanding internationally. This means that more and more SMEs (small to medium enterprises) are faced with the challenge of cross-border banking and international money transfers. International money transfers can be expensive, time-consuming, risky, and difficult to manage; it's not surprising then that many business owners find themselves avoiding these tasks altogether or completely handing their foreign exchange and international money transfer requirements over to their bank to deal with.
In this blog post we’ll outline some of the challenges faced by SME's in cross-border banking and international money transfer as well as what solutions they have available to them today.
As an SME owner, you not only have to ensure that your company provides a good product or service, but also that you are able to stay competitive in an increasingly globalised market. This can involve managing relationships with clients or suppliers overseas. It is therefore essential for business owners to have access to international banking facilities in order to be able make international payments and currency conversions.
Unfortunately, traditional cross-border banking arrangements have been structured to set the bank up for success, not the SME. SME's have long been held hostage by banks who have levied large mark-ups on their foreign exchange conversions and applied unnecessary fees on their international payments. Until recently SME's did not have the clout to demand access to wholesale exchange rates or to tell their bank that they'd go elsewhere. SME's also typically don't have the assistance of a CFO (Chief Finance Officer) to comb through their account statements checking for hidden transaction fees which can erode their business bank balance over time.
SME’s have long been plagued with payment delays, large foreign exchange mark-ups and hidden transaction fees when doing business across borders or internationally. However with the recent crop of fintech companies, the old banking sector has been tipped on its head and younger companies are keen to compete for SME business by offering exceptional exchange rate pricing, a fully-digital online model and 100% human, responsive Customer Support.
So how can SME's tap into the new fintech offering? Read on to find out.
SME's can overcome their legacy business banking challenges by trimming down their relationships with banks who often don't understand their needs. There are two key steps SME’s can take in this respect.
Step 1 - SME owners can start to take back control by researching and informing themselves of the best cross-border banking services that are available. Comparison websites are a good place to start or you can directly check out the latest challenger banks websites who are targeting the SME sector, for example, Tide, Coconut or Starling. Set up a business bank account with your new banking provider, being careful to check their transaction fees and terms and conditions (you don’t want to fall into the same traps as your old bank!).
Step 2 - Once your new business bank account is set-up, start searching for a new foreign exchange provider. A great tip is to look for a company that is a specialist in foreign exchange and international payments. Specialist providers such as TransferLab are ideal for this type of work. Research tells us that a generalist provider, such as a bank, won't do as good a job in this scenario vs. a specialist FX provider, as the specialist’s sole focus is to supply you with competitive exchange rates and speedy international payments. A specialist provider's superpower is their ability to aggregate lots of customer orders and use this combined buying power to obtain wholesale FX rates from the world’s largest financial institutions. They then pass these savings on to their customers. In addition, because specialist providers often have close-knit teams of experienced Sales and Customer Service representatives who deal with businesses like yours every day they are often better placed to help your business than a bank. The general rule of thumb is banks offer a range of financial products and services and are specialist in none. As a result a bank cannot be as agile or responsive to your business foreign exchange and international money transfer needs as a true sector-specialist.
SME's can take back control over their cross-border banking and international money transfers by re-thinking the services their business purchase from third parties such as banks and traditional remittance companies. In the case of cross-border banking and international money transfers, SME owners should look for a specialist in each sector who can provide them with a truly competitive and innovative product or service.
TransferLab is a foreign exchange and international payment specialist and their Company Directors are available to provide a tailored approach to your small or medium-sized business.
Contact us today to find out how they can help you with wholesale FX rates, speeding up your international payments and providing you with the ongoing support that your business deserves.