International business relationships aren’t just for big companies anymore! It may seem crazy, but you can run an Etsy shop out of your basement and have customers all around the world! You can have customers buying your products or services overseas and you can have vendors worldwide that you use to create your products or services. While being a small company you may not have a huge need for regular international business, larger companies can save a bundle by not using their bank to handle international money transfers. Whenever you are in business it is important to watch your bottom line and not overpay for products or services, like international money transfers.
Having a small, medium or large business and having customers or vendors internationally means you need to send or receive funds through international money transfers. While you can use your bank for these transactions, it is wise to consider other alternatives. Banks charge higher rates than that of companies that specialize in international fund transfers like TransferWise, OFX.com, or MoneyGram.com. While banks are considered to be ‘safe’ ways to transfer funds, many of these other companies are equally as safe and less expensive. There are of course the subtle difference between the big companies and there are articles on the web that can help you understand this aspect better. This comparison, as well as this one or this one, give a bit of insight on the topic.
If you are making the same transfers every month for your business you will want to make sure you have an as direct connection as possible to avoid any transfer mishaps. Transfer mishaps may occur because an account is mistyped for either the banking destination or the account destination. If you are sending funds through a bank and they do not have a direct connection with the receiving institution they need to transfer through a third party per SWIFT (Society for Worldwide Interbank Financial Transactions) in order to reach the final banking destination. The more paths a wire crosses the more likely it might encounter a snag in its journey. While SWIFT has formalized transfer messaging it is still not the most direct path for international funds transfers. With all the different parties that might be involved in a wire transfer, it has to be screened for fraudulent activity or money laundering which creates a lag in the transfer process.
Banks are completely aware of the methods they must use to transfer funds and can use the general public’s lack of knowledge of international funds transfer to their advantage. Why wouldn’t they? Banks are in business to make money. They are not an organization out to educate the general public about all the ways to do a money transfer especially when their way is the most expensive one!? If you ask your bank to do a money transfer for you, they will be more than happy to help! In fact, they might offer to handle all of the small details, like when and where to do the transfer. This little detail can actually cost you money. If you transfer at any one given time during the day you can pay a higher transfer or exchange rate than if you did it during a different time of day. Why would the bank opt to handle the transaction when they would make less of a commission? That isn’t good business for the bank, but it would be good business for their customers.
Working with companies like those listed above they specialize in international money transfers and as such, they know how to do the transfer at the most economical time for their customers. Their business model is to create returning customers for wire transfers by offering competitive rates and educating their customers on how they are saving money when using their services. They can save their small and large customers money impacting their bottom lines. When sending money internationally you need to consider a sender fee, receiver fee, and the exchange rate. In general, the larger amount you send the better rate you receive. So a smaller company doing monthly transfers may pay a higher rate than that of a large company sending more money. You would think that sending only a small amount of funds monthly would less expensive than a large organization, however, the overall costs may be less, the percentage of the amount being transferred is generally not.
An FX broker will educate their clients on the best time for international transfers of funds. Different times during the day, week or month can have an impact on the cost of the transaction. Having a company who understands these variations in the exchange market is key to saving money not only the first time you do a transfer but for all the times in the future. An FX broker might ask how often you plan on sending funds and if always to the same location and how much. The broker may point out doing one large transfer each month is better than 4 smaller weekly transfers. These types of questions aren’t because they are trying to pry into your business, but because they want to help you and your business save money. Creating a customer who appreciates the cost savings and the time spent educating them on the process can create a returning customer as well as a walking talking billboard for their business.
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