Financial impact of non-EU international payments on SMEs

Global expansion is being stifled for many SMEs due to the high cost of international transfers and associated FX risk. A recent report published by FXcompared Intelligence revealed that SMEs wasted an estimated total of £2.3 billion on non-EU international payments last year. UK companies exporting goods outside the EU incurred upwards of £670 million in unnecessary direct currency related transaction costs, and for UK importers sourcing goods, the amount is estimated at more than £1.6 billion.

With many of the best opportunities lying within emerging markets, SMEs increasingly require access to a wider range of currencies to enable them to trade internationally.

Currency volatility and business costs present a major risk for SMEs who import and export. And with long-term unrest expected to continue both inside and outside of the eurozone, finding a solution to make transfers as quickly and as cheaply as possible is crucial.

Many businesses see the costs of trading with customers and suppliers outside the UK as an inevitable part of being in a global supply chain. The costs associated with expanding into international markets often result in higher charges being passed down to customers, and the costs of dealing with suppliers in other geographies can eat away at the bottom line. Both can hinder growth; leaving small businesses unable to compete with larger organisations.

Major banks do not tend to serve SMEs well when it comes to international payments, almost exploiting the fact that smaller companies lack the tools, knowledge or capacity to manage their international transactions and currency risk effectively. Bank fees for international transfers are high and typically take days to complete, adding another challenge for SMEs – how to manage cash flow.

The result is that many companies overlook how much money is being wasted, from high FX rates and processing fees to clearing times. Additionally, the more currencies a business needs in order to manage in its supply chain, the more expensive and complex the challenge, with multiple bank accounts needing to be opened in local currencies.

Incumbent banks have had the monopoly on international payments for such a long time that many businesses are unaware that there is an alternative.

SMEs looking to increase their international footprint may be concerned about seeking out an alternative to banks, who, while expensive and slow, are able to offer security and regulation. However, Banking Circle allows companies to manage international payments more efficiently by giving them access to a platform that reduces foreign exchange related costs and significantly reduces the time taken to make and receive international bank transfers; all from within a secure and compliant cloud-based environment.

Access to a daily liquidity pool of €15 billion ensures that fees are negligible and FX risk is minimal. This is all done through a segregated IBAN account, meaning that accounts for suppliers and customers can be easily set up and paid in their local currencies.

Global expansion for SMEs can be hampered by the time it takes to establish banking relationships in international markets; however, as members of Banking Circle they get instant access to the markets they want to do business in, in the currencies they want to transact in with Banking Circle taking care of all the correspondent banking relationships – allowing SMEs to focus on their core business.

The Banking Circle provides the opportunity for SMEs to join as Merchant Members through their PSPs, card acquirers, payment gateway, or FX provider.
For more information on joining the Banking Circle, get in touch.

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