Staggering cost of international business payments

moneyA study has revealed that UK SMEs were overcharged £4,078,000,000 in 2015 while paying for products, services and talent abroad. This cost has risen by almost a billion pounds over the past five years as UK SMEs become increasingly global.

More than half of SMEs that transfer money abroad only use their business bank account to make the payments. However, the banks continue to charge a premium on foreign money transfers.

The problem lies in the exchange rate

In addition to charging high fees, banks are also adding hidden mark-ups to international payments. Instead of using the mid-market exchange rate, which can be found in newspapers or Google, the banks present misleading exchange rates that enable them to secretly charge SMEs again for the same transaction.

SMEs will also be shocked to discover that their banks show more favourable exchange rates to bigger businesses at the same time.

The study, conducted for TransferWise by independent research consultancy Capital Economics, revealed that SMEs in the UK suffer disproportionately from unfair fees on international payments by losing almost 10 times more than big businesses.

This now equates to every SME in the UK unnecessarily paying an extra £755 per year, although businesses that make a large amount of foreign currency payments through their bank will pay considerably more. One in 10 UK SMEs that make international payments now send £1 million or more abroad each year.

The banking industry has been sharply criticised for its lack of transparency on international payments as many businesses are unaware of how they are charged.

A separate YouGov study for TransferWise revealed that more than a quarter (28pc) of businesses believed they were getting a good exchange rate on their international payments by either getting the transfer for free or being charged a flat rate with a reasonable exchange rate. One in five (19pc) businesses admitted they had no idea how they were being charged.

However, the study also revealed that greater use of overseas resources has had an enormously positive impact on UK SMEs, whether making international payments to hire freelancers, buy stock and materials, or enabling products and services to be sold abroad.

Three quarters (76pc) of those doing some form of business beyond the UK said that expanding internationally has increased their profitability.

How to avoid the exchange rate fees on international business payments

Unlike the banks, TransferWise is a money transfer service that does provide the real mid-market exchange rate for international payments. It also charges a simple low fee that is always clear when the payment is being made.

More than £500 million is now moved across borders every month using the TransferWise platform and it is increasingly being used by SMEs for business transactions.

As a result, TransferWise has launched its dedicated product, TransferWise for Business, which makes sending money abroad up to seven times cheaper compared to using a business bank account.

This new international money transfer platform for SMEs makes it significantly cheaper to manage international invoices, pay remote employees and freelancers, fund international offices, or request money from clients abroad.

SMEs in the UK suffer disproportionately from unfair fees on international payments

Nilan Peiris, VP Growth at TransferWise said: “Small and medium businesses are the backbone of the British economy, but too many are getting stung by their own banks. Unfair fees on international payments are harming their growth and many don’t even know it’s happening. This must now end.

“All business is increasingly global so UK SMEs need a fair and transparent way to make international payments. TransferWise for Business provides SMEs with a simple platform that can save them money, open up greater opportunities abroad and help them grow.”

Like the large banks and financial institutions, TransferWise is fully regulated by the Financial Conduct Authority and verifies its users to protect against fraud and money laundering.

However, while banks still depend on outdated payment technology for international money transfers, TransferWise works by using smart peer-to-peer payment technology.

When money needs to be transferred abroad, a simple and secure swap takes place between users in different countries so that high fees can be eliminated. Users are matched across more than 60 countries and 600 currency routes, and the platform continues to expand.

Visit www.transferwise.com for more information. (The Telegraph)

Leave a Reply

Your email address will not be published. Required fields are marked *

*


*

* Copy This Password *

* Type Or Paste Password Here *

176,864 Spam Comments Blocked so far by Spam Free Wordpress

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>