We live in an increasingly interconnected world, and that’s no more true than in business. Today even the smallest firms often do business across borders, exporting or importing goods and services every day. While that has huge potential benefits, it also poses a major question: how do you move money effectively?
Money transfer solutions are one of the big growth markets in so-called ‘fintech’, and there’s now a huge number of options on the market for businesses of every size. So what money transfer facilities are on offer, and how do you choose the best one for you?
Why would I need money transfers?
Regardless of the type of business you’re running, it’s likely that you’ll have to deal with other firms in other countries. Whether you’re buying or selling goods or services, you may need to make purchases or take payments in or from other currencies. Money transfer services allow you to do this easily and cost-effectively.
However, there’s a large range of money transfer services on offer, and they’re not all as good as the next. Your choice of provider will depend on a range of factors, determined by things like the type of transaction you need to carry out.
Can’t I just use my bank?
Of course, you could just transfer money using your bank - every major bank is set up to allow this pretty easily. However, there are some pretty good reasons why this might not be a good idea.
The first of these is price. The rates you pay to move money internationally with your High Street bank are likely to be much higher than those offered by a dedicated money transfer service. Depending on the amount you’re sending or receiving, this could make a difference of hundreds or even thousands of pounds.
Transfer fees are also likely to be more expensive when using a bank to send money compared to a money transfer company. In fact, some money transfer companies even offer free transfers as part of their service.
Speed is another key consideration. If you’re using your bank to move money, you can often expect to wait as much as a working week for funds to clear, depending on the type of transfer you’re carrying out. With a money transfer service, however, you can generally benefit from much quicker transactions, even at lower rates.
How do I choose the best money transfer for my business?
There’s a range of key factors that you should consider when choosing a money transfer service. These include:
• Price. There are two important things to understand when considering the price of a money transfer service. The first is the transaction cost. Some providers will charge a flat fee per transaction, which may vary depending on the currencies being used or the speed of the transaction. Perhaps more important, though, is what’s known as the ‘spread’. In simple terms, the spread is the variance in price when compared with the mid-market rate. For example, if you’re buying Euros and the price to buy one Euro is £1.16, and the price to sell one Euro is £1.10, then the spread is £0.06 and the mid-market rate is £1.13. Good money transfer solutions will give you a small spread, meaning you pay as close to the mid-market rate as possible.
• Services offered. Remember that simple money transfers may not be the only currency service you need. Depending on the requirements of your business (for example, if you want to hedge against currency fluctuations), you might also require spot or forward contracts, or the ability to set stop losses. These additional services are not offered by all money transfer services.
• Currencies offered. This might seem like an obvious one, but you should check to see that your desired currencies are supported by your potential choice of transfer service.
• Account types. The last couple of years have seen a growth in the number and accessibility of holding accounts in which businesses and consumers can store different currencies. These can be very useful, for example providing you with local bank details into which you can receive multi-currency payments.
• Transaction types. Do you need to make recurring payments in different currencies - the equivalent of standing orders? If so, check that your provider offers these, as they are not universal.
• Integration. Finally, as with all of your services, check whether your money transfer provider integrates properly with other software you’re using. Ideally, you should be able to easily reconcile transactions made through your money transfer service with your accounting provider.