In the global economy of today, borders are blurred in the ledger books. For businesses, this means frequently sending payments abroad, whether for purchasing supplies, paying employees, or expanding their operations internationally. Our guide will help you better understand international business money transfers, including the ins and outs of how to pick the right provider and strategies that align with your operations and financial needs.
What are International Money Transfers?
What Types of IMT Are There?
Bank Wire Transfers
Online Service
Foreign Exchange (Forex) Brokers
P2P Transfer Services
International Money Orders
Mobile Wallet
Cryptocurrency
How to Choose the Right Service for IMT
Banks vs. Companies
Exchange Rates
Fees
Payment and Delivery Options
Security
Integrating with Business Operations
6 Tips and Tricks - Smart Business Practices for IMT
Banking with Banxe
What are International Money Transfers?
International money transfers (IMT) are transactions where money is sent from a business or individual in one country to a business or individual in another country.
For companies that operate globally, these transfers are an important part of managing supply chains, paying overseas employees, investing in foreign markets, and maintaining their global partnerships. For individuals, international transfers usually involve supporting family overseas or investing in foreign property.
What Types of IMT Are There?
In the last few decades, new methods of sending money have appeared. This means there is a suitable option available, no matter your needs:
Bank Wire Transfers
One of the oldest methods, wire transfers have been around for decades. These direct bank-to-bank transactions are highly secure, which makes them the preferred choice for transferring large sums of money. Although the fees are steeper and processing times are slower.
Online Service
These services have become more popular over the last two decades. Platforms like
PayPal
(founded in 1998) and
Wise
(established in 2011) have easy-to-use online interfaces and apps. They also offer faster processing times and more favorable pricing. They are a great option for individuals and small businesses.
Foreign Exchange (Forex) Brokers
Forex trading has been a thing for years, but the use of
Forex brokers
for personal and business IMT is a more recent phenomenon. Broker expertise in currency markets makes them a safe and popular option for those dealing with sizeable transactions that would benefit from competitive rates.
P2P Transfer Services
P2P or peer-to-peer platforms bypass traditional banks, allowing you to exchange currencies with others directly. Examples include
CurrencyFair
and TransferWise's P2P feature.
International Money Orders
More than a century old, international money orders are
issued by banks or post offices
to be sent to a foreign country where the recipient can cash them. Electronic transfer methods are much faster and more convenient which has lead to an overall decline in the use of money orders.
Mobile Wallet
Thanks to digital wallets, transferring money to overseas bank accounts can be done directly from your mobile device. Services from
Western Union
allow for instant transfers with minimal fees. This is a good option in regions with high mobile penetration but limited access to traditional banking services. Not all mobile wallets support international payments (or may only support transfers to a few countries), so it's important to thoroughly research before selecting a wallet.
Cryptocurrency
The newest method on this list, crypto transfers, uses blockchain technology to send money across borders without the involvement of traditional banking systems. Transactions can be faster and cheaper, though they come with more volatility risks and regulatory uncertainties.
How to Choose the Right Service for IMT
Every business has unique tolerances when it comes to transaction limits and more. When choosing a service consider the following:
Banks vs. Companies
The majority of business-related IMT will involve one of two established and secure service types:
-
Banks - For security purposes, your business might lean towards banks. It's important to consider that they might not provide the most favorable exchange rates and could impose higher fees.
-
Companies - To access more favorable rates, minimal fees, and quicker transfers, you might prefer IMT companies like Wise or Volopay.
Exchange Rates
The fluctuation in currency exchange rates significantly impacts the amount of money your recipient ultimately receives:
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Mid-Market vs. Provider - The mid-market rate represents the genuine exchange rate between two currencies without any markup. Many transfer services apply a margin to this rate to generate profit. For instance, if the actual MMR is 1 USD to 0.9 EUR, a service might provide an exchange of 1 USD to 0.89 EUR, keeping the difference.
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Dynamic Pricing - Be aware that some providers dynamically adjust their exchange rates in response to market changes. This means the cost of your transfer could experience major swings within a short timeframe.
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Rate Locks - If you are worried about currency volatility, you can use services offering forward contracts. This fixes or locks in an exchange rate for a transfer scheduled in the future.
Fees
More economical transfer options tend to be slower. Understanding the fee structure beforehand is key to finding the middle ground between speed and cost:
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Flat or Percentage Based - Fees can take the form of a fixed amount ($5 per transfer), a percentage (1.5% of the transfer value), or even a combination of both. You almost always want to opt for a flat fee structure, especially for larger transfers.
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Read the Fine Print - Keep an eye out for the hidden extra fees that may not be initially disclosed, like fees taken from the recipient or charges from intermediary banks. These charges can unexpectedly inflate your overall costs.
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Discounts for Volume - If your business regularly makes large or frequent transfers, you might be able to negotiate lower fees or benefit from tiered pricing structures.
Payment and Delivery Options
Carefully choose your payment and delivery methods as these can affect the convenience on both sides of the transaction.
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Payment Methods - You can usually fund transfers in many different ways, including direct bank transfers, debit or credit cards, and even cryptocurrencies. Each option may carry its own set of processing times and fees. For instance, credit card payments might involve extra processing charges.
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Delivery Speed and Methods - How quickly the money needs to move into a foreign bank account can also impact the cost. Standard bank transfers, which might take a couple of days, tend to be cheaper, while expedited services that can complete transfers within hours come at a higher cost. Delivery options, such as direct bank deposits or cash pickups at physical locations, also vary by provider and destination.
Security
Security is a top priority to ensure your funds reach their intended destination safely. Opt for reputable transfer services with strong security protocols and customer protection policies.
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Data Protection - Seek out services that use end-to-end encryption, secure servers, and continuous fraud monitoring.
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Customer Support - Access to dependable customer service is vitally important, especially for big transactions or key business dealings. Go with services that have 24/7 support through multiple channels, including phone, email, and live chat.
Integrating with Business Operations
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Automated Payment Schedules - Select software or providers that allow automated payment setups for recurring transactions, such as monthly payments to overseas contractors or suppliers. This should include flexible settings for payment frequencies, amounts, and the choice of currency.
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Integration with Existing Financial Systems - Ideally, the servicer's software should fully integrate with your accounting software, ERP systems, and other financial tools. This offers coherence in financial records and streamlines your operations.
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Risk Management Tools - Advanced solutions offer features to mitigate currency-related risks, such as forward contracts that secure the exchange rates for future transactions.
6 Tips and Tricks - Smart Business Practices for IMT
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Consider Local Banking Partnerships - Establish banking relationships in key countries to secure more favorable terms and gain access to expertise on local regulatory requirements.
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Diversify Payment Providers - Employ multiple transfer services to have alternative options and capitalize on competitive benefits, such as improved rates or quicker transfer times in certain regions.
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Optimize Payment Routes - Select remittance servicers that offer optimized routing. This reduces costs and delivery times by avoiding intermediary banks.
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Prioritize Transparency with Recipients - Communicate clearly with business associates about expected delivery times, transaction costs, and any potential issues that may arise to build trust and reliability.
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Batch Processing - Minimize transaction fees by consolidating multiple payments into a single transfer. This is great for payroll or handling multiple invoices from the same geographic area.
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Use Local Currency - Whenever possible, pay your suppliers or contractors in local currency. Many businesses prefer this, and it can avoid extra conversion fees on their end.
Banking with Banxe
Banxe revolutionizes the way you handle your financial assets by offering a unified account - merging traditional banking with the dynamic world of cryptocurrencies. With the innovative Banxe Card, you can spend digital or fiat currencies anytime, anywhere. You will enjoy no monthly fees, and free delivery is available for UK residents.
Whether you are looking to enhance the efficiency of your business's global transactions or incorporate the versatility of cryptocurrencies into your financial strategy, Banxe is your all-in-one solution. Equipped with everything from specific IBANs for EUR and GBP, to SWIFT and SEPA transfers, not to mention the capabilities to trade, purchase, and transfer cryptocurrencies, Banxe merges traditional financial services and the cryptocurrency market for a fluid, integrated experience.
Explore Banxe Today!