WorldFrist Home > Blog > Business Banking Insights > An SME’s guide to saving more on international transactions

An SME’s guide to saving more on international transactions

Last update: December 9, 2024

Contents

Discover the top ways to save more on international transfers and protect your profit margins

Partner with a payment provider that offers low transaction fees and competitive exchange rates to save on international transfers
Use a multi-currency account to hold funds and pay suppliers in their local currency
Lock in exchange rates with forward contracts to protect your profit margins from sudden fluctuations in the currency
The World Account offers fast, secure international transfers with competitive fees, exchange rates of up to 0.6% (up to 0.8% for payments on com) and multi-currency support for SMEs

For small and medium-sized businesses, working with international suppliers, partners and customers involves a lot of research and complicated processes. You need to understand local customs, find a reliable international payment partner and ensure the cross-border payment fees don’t cut through your margins.

Currency exchange rates and bank transaction fees can add a huge variable and a hefty expense to the cost of doing business – and significantly impact your bottom line.

If you haven’t yet looked carefully into the fees you’re paying for sending and receiving international payments, there’s a big chance you’re leaving a lot of money on the table that could have been very easily saved.

In this guide, we take a look at how SMEs can save more international payments.

How much do international transactions really cost?

Before you even make a plan to save costs, you need to know the different costs involved in making an international transfer:

Markup on exchange rates: Banks and most payment providers add a margin to live market exchange rates (mid-market rates) which helps them cover the operational costs of international transactions.

While some payment providers are transparent about the markup they charge, others may not be as transparent. But it’s safe to assume you’ll pay a markup on every international transaction. The only difference is the amount of markup you’ll pay – which will depend on your provider.

A good way to compare markups is by comparing the exchange rates of different providers through the currency converter calculators available on their official websites.

Transaction fees: You’ll also be charged a transaction fee for international transfers. While some providers charge a flat fee, others may charge a percentage of the total transaction amount.

Processing fee: Some banks may also charge a processing fee when intermediary banks are involved in the transaction, which can further increase the total cost of international transactions.

How currency markets impact your international payments

Here’s the thing: Exchange rates fluctuate all the time–throughout the day. So, the cost of sending money internationally can vary a lot. If the exchange rate is high at the time of making the payment, the transaction will cost you more.

For example, let’s assume you’re sending payment to a supplier based in China. You want to send CNH 10,000 and the current exchange rate is:

For example, let’s assume you’re sending payment to a supplier based in China. You want to send CNH 10,000 and you had checked the exchange rate in the morning which was:

1 AUD = CNH 4.781

So the cost of sending CNH 10,000 will be AUD 2,091.61 + transaction fees

Now, let’s say by the time you initiate the payment in the afternoon, the exchange rate has dropped to

1 AUD = CNH 4.650

So you now are paying AUD 2,150.54 + transaction fees

If you pay whatever exchange rate your bank offers at the time of transaction and then also pay a fee on top of it, you’ll find yourself paying your bank a lot of money that could have easily been saved.

Here are some of the ways currency markets impact exchange rates:

Inflation and interest rates

Too much inflation leads to goods and services becoming less affordable to the public. As a result, the central bank adjusts interest rates to manage inflation, directly affecting the exchange rates. Higher interest rates can increase a currency’s value by attracting more overseas investment.

Global trade relationships

Trade relationships between countries can also affect their respective currencies. Countries that export more than they import have a trade surplus and usually have stronger currencies.

Recession

When a country goes through a recession, its economy can shrink and interest rates can fall. Consumer spending decreases, which can negatively affect the currency’s value.

Stock markets

When the country’s stock markets perform well, the demand for the country’s currency increases, directly improving exchange rates. On the contrary, the demand for the currency can decrease when stock markets perform poorly.

Market sentiment

Market sentiment can also directly affect currency exchange rates. For instance, the Australian Dollar is a risk-based currency heavily dependent on global growth and commodity prices. If the market is positive, the Australian Dollar stays strong. If market sentiment is negative, the currency can weaken.

Things to consider when making international payments

Here are the main factors small and medium-sized enterprises should consider when making international payments.

Costs

What does it cost to send international supplier payments?
Are you also charged for receiving payments from customers?
How much of your profit margins get undercut due to the transaction fees?
Could you save more if you partnered with a payment provider with low transaction fees and competitive exchange rates?

Speed

How quickly does money arrive at its destination?
Can the payment provider commit to the payment timelines?
Do you get the option to make same-day or next-day payments?

Security

Is the transaction secure?
What measures does the payment provider take to ensure your money is always protected?
How is the payment provider regulated?

Volatility

Is there a way to protect your profit margins if the currency market is volatile?
Can you place firm orders or forward contracts?

Ease of access

How easy and quick is it to make international payments?
Can you make payments online without needing to visit a branch?
What kind of customer support can you get? Do the support hours match with your business hours?

Top tips to save money when making international transfers

Here are the top tips to save more on international transfers

1. Find a payment provider with low transaction costs and markups

One of the easiest ways to save more on international transfers is by choosing a payment provider with low transaction costs and competitive exchange rates.

WorldFirst is a one-stop digital payment provider for global businesses and SMEs in international trade. With a World Account, you can send payments in 40 currencies and receive payments in 24 currencies.

There are no charges for receiving payments into your World Account. Sending payments involve a fixed transaction fee and up to 0.6% currency conversion rate (up to 0.8% for payments on 1688.com)

You can make free and instant international transfers if the recipient also has a World Account.

Same-day or next-day transfers are possible in multiple currencies (cut-off timings apply).

For any help, you can contact the support team, who are available 24/5 via phone and email. We operate real-time fraud monitoring, blocking and alerts. Your login is secured with two-factor authentication via the Authy app.

2. Use a multi-currency account to send and receive payments like a local

Multi-currency accounts allow you to send, receive and hold funds in multiple currencies. The biggest advantage of using multi-currency accounts is that the received funds aren’t automatically converted into your base currency unless you want to repatriate them.

Instead, you can hold the funds in their respective local currency accounts and use them to pay suppliers or business partners–avoiding double conversion and saving costs.

For instance, let’s say you have a supplier based in the US and customers in the same region. You can collect funds in USD from your customers, hold them in your USD local currency account and use them directly to pay your US-based suppliers.

You can also repatriate the funds back to AUD when the exchange rates are favourable.

The World Account is a multi-currency account that allows you to send, spend and hold funds in 15+ local currencies, including GBP, USD, CAD, AUD, CNH, EUR and JPY. You can pay your suppliers in their preferred currency and collect payments from 100+ marketplaces and payment gateways, including Amazon, eBay and Stripe

With a World Account, global payments are as easy as local ones, whether you’re sending or receiving.

3. Use forward contracts and firm orders

Another good way to save on international transactions is by choosing your own exchange rates.

Sounds too good to be true? You can actually do that if your payment provider supports forward contracts and firm orders.

Forward contract

With a forward contract, you can lock in an exchange rate for a fixed period of time on a predetermined volume of currency. It allows you to hedge against the currency market and protect your profits.

WorldFirst offers forward contracts, allowing you to lock in an exchange rate for up to 24 months.

Once you have signed up for a World Account, you can connect with your dedicated relationship manager to understand the terms of the forward contract, which can include:

The currencies involved
Rate of the contract
Tenure (length) of the contract
Deposit/initial margin requirements in case a credit facility is appropriate to help cover initial margin requirements
Understanding if you’ll be using this (forward bought) currency in relation to the sale or purchase of goods or services or for direct investment

Firm orders

With a firm order, you specify the exchange rate at which you would like to make the transaction.

The payment provider works on your behalf, keeping a tab on the fluctuating exchange rates throughout the day. When your chosen exchange rate goes live, the currency is automatically purchased.

You can set up a firm order with WorldFirst by deciding your target exchange rate and date of expiry. Your relationship manager can help you fill the firm order and manage it.

Fast and secure international payments for your business

Open a World Account to save on international transactions with competitive exchange rates and quick transfers. WorldFirst aims to simplify international payments and collections for online sellers, SMEs and global businesses.

Disclaimer: The information contained is general only and largely our views. Before acting on the information you should consider whether it is appropriate for you, in light of your objectives, financial situation or needs. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions, estimates, mentioned products/services and referenced material constitute the author’s own judgement as of the date of the briefing and are subject to change without notice. WorldFirst shall not be responsible for any losses or damages arising from your reliance of such information.

Based in Sydney, Jim is responsible for the WorldFirst business across Australia and New Zealand. He brings with him over 25 years of experience helping Business Owners, CFO’s and Treasury Managers overcome the challenges with cross border payments and navigating volatile foreign exchange markets.

Jim Vrondas

Author

Country Manager ANZ at WorldFirst

The simpler way to pay and get paid

Save money, time, and have peace of mind when expanding your global business.

Get started

Multi-currency accounts, competitive FX, and global transfers — Everything you need to pay and get paid internationally

Who We Are >

Named a Top Global Fintech Company by CNBC & Statista, we’ve supported 1.5M+ businesses since 2004.