The UK’s main exports include motor vehicles, pharmaceuticals, and fizzy drinks. This means, for the most part, we import a lot from other countries to keep our society ticking over (around £475.63 billion worth of goods in 2020, actually).
International barriers to trade are also breaking down globally, making it easier and cheaper for companies to import goods from other countries and make multi-currency transactions to keep up with fluctuating global demand.
So, if you’re an e-commerce seller looking to make the most of importing cheaper goods, multi-currency transactions are likely to become part and parcel of growing your business. You need to make sure that you can access reliable payment methods 24/7 to remain competitive within the global marketplace.
This article will explain what a multi-currency account is, and why it makes sense for importers to open these kinds of accounts if they have trading partners in several countries.
What is a multi-currency account?
Traditional multi-currency accounts allow you to hold multiple currencies in one account that is linked to the bank account in your home country. All major banks, and even some private banks, offer these types of accounts. However, they do come with fees, which can be broken down as follows;
- Minimum balance: Some banks stipulate that you must deposit a minimum amount into a multi-currency bank account. In many cases, the minimum balance can be quite high.
- Transaction fees: These vary between banks, but you may be charged per transaction for withdrawing funds and making payments. There may also be a fee for using an agreed overdraft facility.
- Monthly set up fees: As well as a minimum deposit; some banks may charge a monthly fee for opening a multi-currency account.
- Exchange fees: Traditionally, importers would seek to buy currency at a favourable exchange rate and store it in their multi-currency account for when they needed it. However, exchange rates appreciate and depreciate daily, meaning there may be instances where the importer locked in a less-than-favourable exchange rate on a significant sum within their account.
Why importers should open a multi-currency account
Suppose you are an e-commerce brand, and you regularly import goods and services from other countries. In that case, you will find it easier if you make transactions in your business associates’ home currency for many reasons:
- You can make faster payments if you hold funds in multiple currency accounts. SWIFT (Society for Worldwide Interbank Financial Telecommunication) transactions can take up to a day to process, causing delays in your supply chain.
- You can get better exchange rates on funds you already hold in different currencies. If you are transferring funds often, you may lose revenue if you constantly have to convert money back and forth from your home currency.
- Make the most of better interest rates. Some banks allow you access to better interest rates in line with the currencies held in multi-currency accounts. In some cases, your savings can go further.
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- Open up to 10 local currency accounts, with local sort codes, account numbers and IBANs
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- Pay and get paid easily with local bank details on your invoices
- Lock in conversion rates to manage your currency risk
Therefore overall, for faster and more cost-effective transactions, importers should consider opening accounts in multiple currencies.
However, as mentioned previously, multi-currency accounts from high street banks come with extra fees. So many small e-commerce businesses may feel like they are priced out of opening an account.
If you are starting as an online seller, don’t worry, there are alternatives to opening a multi-currency account with your bank. Known as money transfer services, these currency exchange platforms are designed with SMEs in mind to help them access global trade opportunities.
Benefits of money transfer services for SMEs
At first glance, setting up a borderless money transfer service account is easy to do. You do not have to seek business approval from your bank. All you have to do is register an account online, verify your ID, and you’re good to go. Once you have set up your multi-currency account with a money transfer service, you can enjoy the following benefits:
- No minimum deposit: Many standard business accounts are free to open, although some providers may charge a monthly fee. However, the monthly costs may be cheaper than some bank-owned multi-currency accounts. Paid-for money transfer service accounts can also offer additional services like a mobile app dashboard, FX-optimised debit cards, and free cash withdrawals from international ATMs.
- Flexible exchange rates: There are many accounts with options to hold funds in over 60 different world currencies. Sites offering a broad range of currencies eligible for exchange are ideal for e-commerce brands looking to expand their business to customers worldwide. In many cases, these services also enable you to lock in a reasonable exchange rate for a set period. Locking in exchange rates frees-up business cash flow and prevents the hassle of buying up currency when you see that the exchange rates are favourable.
- Cheaper processing fees: Fee structures across many money transfer services are transparent and affordable (on top of the base exchange rate). The minimum amount you can transfer in a single transaction, in some instances is as low as £1.
- Integration options: A number of money transfer sites can easily integrate with your accounting software (such as Xero), making it easier to keep track of your revenue streams –– whether you are collecting funds from customers abroad or paying a foreign supplier’s invoice.
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