In today's global economy, it is common for most companies to depend on overseas vendors, suppliers, contractors, customers, freelancers, and business partners in different countries.
Things can get tricky especially when you have to do business money transfers internationally. It can be time-consuming, complicated, costly, and labor-intensive.
Traditionally, banks have been the only option and probably the safest option to transfer money internationally to vendors, suppliers, partners, and others. This meant the cross-border payments market was dominated by the SWIFT system via these banks through their correspondent banking relationship and international presence with almost zero competition.
SWIFT or the Society for Worldwide Interbank Financial Telecommunications is a global messaging network used by banks and other financial institutions to securely transmit money transfer instructions and information between banks. The two participating banks may sometimes need the help of correspondent banks to facilitate the transfer of funds across international borders. In such cases, additional fees are charged. Hence, transaction costs can be higher.
Most high-value cross-border payments are done via the SWIFT system. Moreover, people know what to expect with bank wire transfers as most businesses already use them domestically.
The major drawbacks of traditional bank-to-bank transfers are the lack of transparency with fees, excessive transaction costs, marked-up exchange rates, long settlement period, limited accessibility which creates frequent inconveniences to both private customers and businesses.
Earlier there were no alternatives to banks but in the last few years fintech has brought a positive change to this market.
For businesses to thrive globally, the money must flow easily and efficiently across international borders. Let's look at what options are available that can make this happen.
Money transfer companies or remittance transfer service providers are businesses that specialize in money transfer for customers to people and businesses in foreign countries. Many reputed players of the industry are licensed and are regulated.
Using international money transfer services instead of banks for business transactions is a smart move as it can save time and money.
Thanks to the significant growth in financial technology over the years, people have access to better services when it comes to business money transfers including convenience, speed, security, transparency, and optionality.
One of the key challenges for a business that needs to pay many people (in some cases hundreds of people overseas) is that payment processing for such bulk payments is still a big issue and concern. Most banks have tools that allow such high-volume payments but they can be hard to access and have plenty of limitations. A better solution is to look for companies that offer bulk payments service such as Wise, PayPal, etc.
Another major challenge for services that bridge the gap between freelancers (located globally) like Upwork is being able to instantly pay freelancers in their local currencies.
By tapping into technological advancements in the financial sector, payments for freelancers and the gig economy workers (who are growing in numbers year after year) can be made instant, seamless, transparent, and convenient. This can promote a healthier and sustainable gig economy.
Here we break down the top reasons why money transfer specialists are a better option for international money transfers:
Banks and FX brokers hide fees with poor exchange rates, which means businesses especially small and medium-sized enterprises (SME) often lose excessive amounts of money in international payments even without realizing it. This can harm their growth towards global expansion (losing up to 3% on each transaction is not reasonable).
On the other hand, money transfer specialists offer competitive exchange rates (close to mid-market rates-the one you see on Google or Reuters) with transparent fees, so that people on the other end get the best value for their money.
Transfer fees are high when you send money via banks. Some charge a percentage of the exchanged amount, while others have a fixed fee per transaction. Some may either offer lower fees with poor exchange rates or no fees but take a profit from the margin between their offered rates and the mid-market rate.
Also, there may be fees for incoming and outgoing wire transfers with some banks.
Let's say, your customer or the client is sending the money to you and they have to pay the sender's fee at their end. This can be a problem if the cost is cut from the money you were supposed to receive. As a consequence, you get less of your payment.
For freelancers, they must opt for a more affordable payment solution that increases their chances of getting paid properly, without losing the money on fees and exchange rates.
Most remittance companies charge little to no fees and have no hidden charges. They often give discounts and offers to attract customers. The market is highly competitive which is good for the customers as it results in overall lower cost.
A major advantage of using money transfer companies over banks is speed. Banks take longer to process your transfer request and can further delay it because of its short hours and holidays. Money transfer services offer superior convenience and faster delivery.
Additionally, there are different delivery methods that one can choose to further speed up the transfer with little extra fees.
Money transfer companies allow people to transfer money via an app on the phone or tablet, or website, simplifying the process of transferring money. Or choose to transfer by handing over cash at the money transfer agent locations. The money can be received as bank deposits, cash or can be deposited into mobile wallets.
Customers can also pay via multiple payment methods including banks, credit cards, debit cards, or other options such as Apple Pay, Google Pay, Square Cash, ACH, SOFORT, iDEAL, etc.
One issue with money transfer companies is the variability. Fees, speed of transfer to name a few will vary depending on several factors such as the destination country, transfer amount, payment method, delivery method, currencies, and more.
At the end of the day, businesses need cheaper and faster transfers for making and accepting payments.
With international money transfer companies, businesses will get higher exchange rates, lower costs, faster service, and better customer service which bring great value to companies with regards to managing international money transfers and foreign exchange.
International money transfers are also handled by FX brokers such as DirectFX or cross-border payment platforms such as TranSwap.
If you shop online and are familiar with e-commerce, you must know PayPal.
PayPal revolutionized the way businesses conducted online transactions. It is a trusted payment solution for merchants around the globe apart from being a popular P2P consumer wallet. The payment platform is commonly used by freelancers and businesses that have clients abroad.
Today, there are almost 300 million PayPal users worldwide, over 20 million active merchant accounts, and billions of transactions are carried out each year.
Although PayPal is a popular payment platform, there are several PayPal competitors. Let's see what these alternatives are. And decide which one is best for your customers and your business.
Stripe is similar to PayPal in many ways. Like PayPal, Stripe users can manage transactions from anywhere in the world and have similar pricing. They both provide online and in-app payments and let you deposit funds directly into your bank account among others.
However, Stripe is popular among business owners with a background in programming that allows them to manage and organize their data, meaning it has a flexible application programming interface (API).
Wise (formerly TransferWise) is probably the cheapest way to send money overseas. This is a great option for businesses with frequent international transactions.
They offer you the mid-market rate, have no hidden fees, and have low transaction fees. It lets you run payroll, batch payments, and get paid by clients.
Wise's multi-currency account lets you manage money in more than 40 currencies.
Shopify is an e-commerce platform that hosts more than a million store owners. Through the partnership with Stripe, Shopify Payments allows online sellers to set up payments for their stores.
Shopify payments accept all major credit card and debit cards payments directly from the store. With Shopify POS (point of sale), sellers can use this feature to carry out transactions in the real world using a card reader.
Any transaction details and inventory are synced with the seller's online Shopify account so that you can sell from anywhere and all the data can be managed from one place.
There are several useful features such as abandoned cart recovery, order management, additional third-party integrations, and real-time carrier shipping that lets you calculate shipping costs.
Skrill is an e-commerce business that allows users to make payments and transfer money safely online. With Skrill, sending and receiving come with no fees.
Only an email address and password are needed to transfer money. It can store card information for faster checkout and link bank accounts. Skrill also has great tools for fraud and risk management. The easy way of depositing money and enhanced security makes it the top choice for online casinos and is also commonly used by betting websites, freelance marketplaces, etc.
Users can receive and pay money in 41 currencies and can add 4 different currency accounts to just one Skrill account.
Google Pay is a digital wallet that can be handy for both merchants and customers. It can store credit and debit card information for quick checkouts, cash balances and can integrate some crypto wallets. Many payment processors support Google Pay.
Google Pay lets businesses streamline their payment process for customers which can lead to increased sales. There are no transaction fees. Its security features prevent risk and exposure to fraud.
Customers can make online purchases without having to redirect to a third-party site. When buying in stores, a virtual account number is used instead of the actual credit or debit card number.
Amazon Pay, owned by e-commerce giant Amazon, is an online payment service that lets users make payments with their Amazon accounts for purchases on third-party merchant websites, in apps, and using Alexa.
For small or large businesses, Amazon pay offers quick and easy checkout for customers shopping on their online stores. Consumers don't need to provide their credit/debit card information to make a purchase and eliminate the need to create different accounts on multiple websites.
The streamlined checkout process creates a positive user experience and drives conversion rates for businesses. Store owners can seamlessly integrate Amazon Pay into their e-commerce sites.
Business money transfers are an integral part of everyday operations for businesses. It is crucial that money gets to where it needs to go for the business to run smoothly.
Any hindrance or mismanagement in the funds affects operation and can stunt the business growth. Choosing the best payment services that help your business and your customers should be a priority.
After all, business is all about bringing value and providing the best user experience to customers.