Making overseas payments in your business

Consultants Oxford Economics have estimated that international trade is currently worth more than £700 billion to the UK. The small and medium-sized enterprises (SMEs) it has surveyed forecast a growth in their cross-border trading of between 40% and 66% in the next three years. The number of SMEs that do business in at least six foreign countries will increase by some 129% over that same timeframe.

If you are not already doing so, the chances are that you may soon be making overseas payments in your business.

In the fairly recent past, it was a relatively complicated and expensive process transferring money overseas. These days – thanks largely to the innovations made by a growing number of fintech companies – international transfers abroad have become more transparent, convenient, efficient, and cheaper.

What’s changed?

When it comes to business money transfers, the old guard remains. These are the banks, foreign exchange brokers, and money transfer companies respectively.

Although high street banks have traditionally arranged such transfers, many of the processes – especially the charges and commissions – have remained opaque. Customers may have been uncertain about the rate of exchange being used and became aware of the charges and commissions on any transfer only after the event.

Although foreign exchange brokers were typically relied upon to offer a more competitive rate of exchange, their services were generally reserved for businesses looking to make relatively high value transfers.

That left money transfer companies to handle the volume of smaller transactions – although the costs of these remained high.

Fintech banks and start-ups

The scene has been changed quite dramatically by a number of fintech companies specialising in payments processing and business money transfers overseas. By exploiting the potential of digital platforms and mobile apps, they have quickly emerged as the champions of faster, more convenient and cheaper money transfer solutions.

Technological innovation and creativity have driven the competition. New ways of doing business have emerged in the field of international money transfers.

For example, some money transfer services do not need to rely on money actually leaving the country for an international payment to be made.

Instead of acting on a transfer instruction by sending money directly to the intended recipient, the funds are redirected to the recipient of an equivalent sum travelling in the opposite direction. Potential costs and losses on the rate of exchange at either end of the transfer route are thereby cleverly avoided – transparent, fair and cost-effective business money transfers are achieved in both directions at once.

This is just one example of the way in which digital platforms have been employed to create innovative ways of achieving the same ends – safely and securely transferring money across borders from one business to another.

Innovation has created other cost-effective ways of securing your business money transfers. A careful comparison of the various competing systems, apps and online processes currently available may help you home in on the method or methods suited to your particular business.