When first starting your own company the excitement and enthusiasm can easily take hold. Meaning that more emphasis will be on growth, your product and staff rather than day-to-day housekeeping to ensure that the company runs correctly, and your turnover and profit is used effectively.
A typical oversight of many new businesses will relate to general finance and almost certainly the process of sending money overseas when paying staff or purchasing stock from overseas. When businesses send money internationally the process tends to be an afterthought. Typically executed by their retail bank it rarely cost-effective and nearly always without the necessary guidance or consultation.
Used by the lion’s share of businesses, retail banks typically offer over the counter (OTC) FX services to businesses that send money internationally. Start-ups with a low turnover or profitability are unlikely to receive a huge amount of guidance. Staff in the majority of banks are unlikely to be experts in FX and therefore will unlikely be able to advise on market movement or economic data that could impact FX rates significantly.
Retail banks money transfer services also typically entail a transfer fee which could range from £10-£40 subject to the bank and the beneficiary location. Transfers are also typically less immediate than an FX specialist and can take up to a few days to be processed and sent. The applied margin will also tend to be higher and therefore businesses will receive a worse rate than rates typically offered by an FX specialist or international money transfer company.
Despite this, if you already have a business account established with your bank the ability to send money internationally will already be available. Whilst the options available with an FX specialist will be more diverse and tailored to your business’s international money transfer needs, you may want to consider whether the paperwork required and proof needed outweighs the savings. In particular, if your international payments values are under £50,000 per annum or currency equivalent.
A broad array of challenger banks have flooded the market in recent years. Many are based app-based and aimed at young entrepreneurs that demand quick and easy management of their money and prefer a more autonomous approach to banking. These app-based challenger banks will typically offer a range of services all at the touch or swipe of a smartphone. Banks such as Starling also cater to businesses that send money internationally and offer very competitive rates and charge relatively modest transfers fees. These can be excellent for those travelling and working around the globe. The Applications are highly intuitive and can make international business payments on the go very straightforward.
Starling is a fully regulated entity whose headquarters are based in London however always ensure this is the case when selecting a challenger bank. Online customer services tend to be good but please bear in mind that the majority of your contact will be via the App and email which can mean queries or disputes can be protracted. Challenger banks in terms of FX tend to lack the sophistication of specialist FX firms and won’t necessarily be able to proactively advise and offer the level of detail offered by a specialist FX firm meaning that businesses that send money internationally won’t be guaranteed hedging products such as Forward contract and options. They can, however, be more than acceptable for those who don’t require vast sums of currency and whose business is less dependant on hedging or significant currency swings. Setting up with a challenger bank is typically easier than a retail bank and applications are always nearly always handled online.
The market place for both Fintech and challenger banks expands every year with more and more companies providing solutions to individuals and businesses. Specialist FX companies have far from rested on their laurels with registration processes, App’s and service levels constantly being improved. Allowing clients, the convenience and autonomy of trading online but also allowing them access to consultancy and information when making more significant transfers. Currencies Direct for example allowing clients to trade sums of up to £25,000 or currency equivalent online, but not obligating them to.
Whilst retail banks and challenger banks promote a handful of products FX firms remain specialists in the process of exchanging currency and helping businesses send money internationally. Meaning that they will be able to offer your business a tailored solution, taking into account your turnover, FX risks to your bottom line and the payment terms of your suppliers or workforce.
The contract options on offer are typically more accessible than with retail and challenger banks meaning a dedicated currency adviser can talk you through the options of significant transfer and plan in much more detail. They can also proactively contact you if you have a targeted rate or wish to avoid trading your currency at a market low point.
Whilst getting your FX account set up can take a little longer than with the bank typically, if correct documentation is available the process should only take a few hours. This can take a little longer if you are sending money to exotic locations of if your company has multiple ownership layers.
PayPal provides an excellent solution for companies who trade online and can offer unrivalled convenience. Set up is extremely straight forward, the mobile site and App are highly intuitive, and they can be excellent if you’re dealing regularly with freelancers and developers which will also appreciate the convenience of PayPal’s online invoicing system. This being said transfers in the tens of thousands should be avoided, whilst you incur no transfer fee the rate is far from as competitive as those offered by FX firms and some challenger banks, who now arguably offer superior online international transfer services and better customer service.