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Businesses Shift To Using International Transfer Service To Cut Forex Fees

Compare Forex Brokers
17 September 2020 5 minute readShare

Promoted by Compare Forex Brokers

COVID-19 measures implemented by governments have had a big negative impact on daily operations, continuity and viability of many businesses across the nation. As a business owner, you would be thinking how to save on costs to get through this period and at the same time make your business stronger long term. One way to do this is to look overseas options however payments overseas can be costly so it pays to do your research. 

According to Mercator Advisory Group’s report, statistics for international payments with small business in 2020 include:

  • Business cards (50%) and credit cards (43%) dominate, making up 93% of payments 
  • A 7% increase in international payments (43% in 2020, 37% in 2019)
  • PayPal has seen an increase in payments to 25% in 2020, up from 13% in 2019
  • In 2020, 20% of small business made international transfer with bank account (up from 12% in 2019)
  • International Wire transfers jumped 10% in 2020 to 17%

While these statistics apply to the US rather than Australia, they show the changing nature of international payments in the new COVID-19 world and how business are increasingly looking overseas for solutions. The domination by banks also demonstrate a lack of awareness by business that there are cheaper methods to make international payments.

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International payments using bank tools such as wire transfer, accounts and cards are typically the most expensive international transfer method available. Looking at alternate payments providers can save you about 10%. e-wallet providers are not much cheaper, providers such as PayPal can cost an extra 5%. For this reason, it is worth looking at online business transfer companies.

 

 

Why Are Banks So Expensive?

Banks double-dip when it comes to international transfers. Firstly, when you make a transfer, a flat fee will be charged. For ANZ, a transfer of less than $10,000 has a fee of $9. The second cost is the exchange rate your given and banks exchange rates compare poorly to the true exchange market rate. Using ANZ as an example, if you send $100 AUD overseas, the recipient will receive only $70.72 USD. This means you sent $2.46 less than could have been sent when you compare with the actual exchange of $73.18 shown on Google.

Justin Grossbard from CompareForexBrokers said that “the spreads the big banks charge are just too high, especially considering they charge a fee on top of these rates”. Some other payment options are not much cheaper including PayPal, Western Union and MoneyGram which also charge fees and offer poor exchange rates.

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How Do Transfer Companies Save Companies Money

Online money transfer companies such as OFX, TransferWise, World First, Remitly and Travelex specialise in affordable international transfer solutions if you need to send large and regular volumes of cash overseas. Most have minimal (if any transfer fees) and offer better foreign exchange rates for most currency pairs than banks and other international transfer agents do (though do not that some may have a small sign up cost).

One of the leading Australian based providers, OFX, highlighted just how much a business can save using their service compared to the big 4 banks.

OFX saves businesses funds through a superior exchange rate. The second way is they have low fees per transaction which is can make a big difference for any business who makes regular smaller transactions.

Choosing a provider for Forex Transfers

When choosing an online money transfer company, the first thing you need to do is check the company is regulated. All Australian companies must be regulated by the Australian Securities Investment Commission. You will be able to confirm a company is regulated by checking the bottom any page of the provider's website. Working with a regulated provider ensures the company is trustworthy and that they are allowed to operate in Australia.

Just as regulation improves a companies trustworthiness, a good transfer company will be transparent with their pricing and policies. This means they will advertise their rates on their website and confirm final costs with you before you process your order. They will also have a product disclosure document (PDS) that can be found on their website.

When choosing a payment provider, it is worth looking at different companies as some may offer better rates for the country you are dealing with. Some companies may be better for the USA and others for India. You should also keep in mind the currencies you will need to exchange. While most companies will have the main currencies, some minor or exotic currencies might need a specialist provider.

Lastly, it can be a good idea to read reviews about the provider. This will help you know the benefits and weaknesses of potential transfer companies. You need a company that is reliable and will complete transfers in a timely fashion at the promised rates. When your business is dealing with large sums of money, you will want an online provider with a good reputation.

Why Has International Transfer Demand Increased?

Quarantine measures and restrictions implemented by governments will likely have forced you as a business owner to think about how to make your operations leaner and look at opportunities to save on costs so your business has a strong foundation to thrive after COVID-19 end. One of the ways this can be done is looking at resources and opportunities available beyond our borders. Implementing these ideas will lead the need to increase international payments.

1) International remote workforce

As a first line of defence to help reduce the spread of the contagious COVID-19, the government may have encouraged (or forced) your businesses to allow employees to work remotely from home (where possible). With this change, as a business owner and employer, you may have seen some of the benefits of a remote working and might be thinking of embracing the mobile workforce concept.

A remote workforce brings the promise of greater employee productivity (if managed correctly) and a reduction in the costs needed to operate an office. Already we have seen major companies like Facebook and Twitter announce they will allow employees to work from home permanently. With this in mind, there is a wealth of talent and savings opportunity due to cheaper labour and a larger pool of quality skills available overseas.

2) Disrupted supply chains

If you have a business that depends on deliveries as part of their supply chain, you might have experienced how badly exposed your business can be when the chain is disrupted. Nationally, we have seen suppliers struggle to deliver raw goods as they have been forced to close their business or reduce staff. Internationally, supply chains have been ground to a halt, as countries have closed their borders or reduced their output.

To resolve this, you may be thinking about the need to think about diversifying your supply chain. This can mean distributing supply across multiple geographies and minimising dependency where there are single points of failure. Working with multiple regions is an expensive process and providers will need to be paid without high overhead costs.

3) Digital transformation

With many physical stores force to close (at least temporarily), your business may have had to shift to online or have your online presence increased. It is almost inevitable this will mean foreign payments at some point. This could be in the forms of costs to transform your legacy payment system to make it more digital or employing web developers and designers in India to set up an e-commerce website.

Time vs Reward For Switching

In our experience, setting up an account with OFX or TransferWise takes 10 minutes with the right paperwork. While creating the account itself can take a few days to clear., after that it becomes quite seamless to send overseas payments. If making regular overseas payments is becoming part of your business process, then switching away from to a more economic transfer provider will save you significant business costs.

Businesses Shift To Using International Transfer Service To Cut Forex Fees
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