According to CB Insights' 2021 State of Venture Report, fintech funding shattered several records last year, with $132 billion raised. Fintechs received $1 for every $1 invested. In today's world of globalized commerce and advanced technology, many small and medium-sized enterprises (SMEs) do business globally. Whether it's purchasing materials from an overseas supplier or paying employees in remote locations, more and more cross-border payments are being made on a regular basis.
Making money transfers to international recipients for SMEs entails going through banks and paying high fees, right?
Not any longer.
With the arrival of money transfer providers in recent years, SMEs now have more options when it comes to sending money overseas.
Money transfer providers can offer competitive rates whether your company is transferring money on a regular basis to pay for employees all over the world or purchasing large-ticket items from overseas suppliers.
It is worthwhile to shop around and compare the true cost of foreign exchange transactions to your company. You may not realize it, but your company may be paying too much in transaction fees, FX spreads, and other non-transparent fees charged by banks.
Money transfer providers typically offer lower rates, faster transfers, and superior customer service when compared to banks. But, can these money transfer providers – usually fintechs – match the services provided by banks and other more established financial institutions?
Let's take a look at some of the most important factors to consider as a business owner when making international money transfers and compare the service and cost of banks and money transfer providers.
Here are the top six factors to consider when looking for a money transfer service provider.
Unlike banks, which typically have multiple branches, money providers typically employ a small and efficient team of FX experts. This means they can pass on the savings to their clients while keeping their operating costs low. If you can get better foreign exchange rates from a money transfer provider, you could save a lot of money, especially if you make regular payments or transfer funds.
Compare the FX rates you're receiving from your bank or other providers to ensure you're getting the most competitive and appropriate rates for your business.
Money transfer providers in general offer transparent fees as an alternative to banks, which is one of their most obvious advantages over the big banks. You, as a business owner, want to know what fees and charges you will incur when making international money transfers.
If you are being charged hidden fees and unexplained amounts for every foreign exchange transaction, it may be time to ditch the bank and work with a money transfer provider.
Do you understand all of the fees that banks charge for foreign exchange transactions? Check to see if you're paying any extraneous fees.
Money transfer providers that use advanced technology to deliver their services can provide a more efficient and faster transfer than going through banks. In most cases, funds can be delivered to recipients within a few hours after all compliance and regulatory checks have been completed. Money transfers with many banks can take up to 2-3 business days.
You want to know that the money you're sending to international recipients is delivered quickly and efficiently in today's world of instant transactions.
Are your money transfers reaching their intended recipients on time? Or are you missing out on transactions while being charged extra fees on the other end?
Money transfer providers, unlike banks with limited physical presence, typically operate on a global network. While some may only serve major markets such as the United States, United Kingdom, Europe, and Asia, the majority serve multiple countries. This means that whether you're sending money to pay remote staff salaries in Hong Kong dollars or buying from a supplier in Euro, most money transfer providers can handle the transaction.
For example, if you use Instarem for Business, you gain access to a multi-currency platform that allows you to send and receive money from and to approximately 65-100 different countries (terms & conditions apply).
While banks may be able to complete the transaction, it will most likely cost you more and take longer to complete.
Does the bank allow you to transfer money across the globe or in most countries where you do business? Or do they reach only a limited number of countries and regions?
The majority of money transfer companies are niche players. Furthermore, because they specialize in foreign exchange and international money transfer transactions, they can provide businesses with laser-focused attention and support for all aspects of international money transfers.
Do you have access to a Relationship Manager if you have currency-related questions? Or do you only get generic and ambiguous responses from bank employees who have limited knowledge and experience with foreign exchange?
With foreign exchange experts operating most money transfer providers, they can deliver better customer service that you won’t get from the banks and other financial institutions. Should you need help with their money transfer platform, they can provide guidance and support.
Given the alternative and the benefits of using money transfer providers, why would you keep using the banks for international money transfers?