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How to move currency between international offices quickly, securely and cost-effectively

Reece Dye

Head of Corporate Clients

Operating a business internationally is a complex and dynamic process. Get it right and the potential benefits are compelling: new revenue stream, more investment opportunities, access to diversified markets, access to a larger talent pool, gain competitive advantage, global brand development. Get it wrong, however, and the consequences can be severe - from reduced productivity and decreased profits to bankruptcy.

To thrive on the international stage, you must understand the challenges your business will be exposed to. This proactive approach will provide you with the foresight required to prevent or mitigate the hurdles you might face in the future and set you apart from competitors who are reactive to risk - a short-sighted tactic that involves crossing your fingers and hoping you avoid any nasty surprises.

Constant change is a hallmark of operating a business internationally. The subsequent unpredictability of future events and market conditions often manifests itself as risk. Common risks that international businesses must be aware of include: credit risk, compliance risk, intellectual property risk, ethics risks, shipping risks, political risks, and cultural risks.

There is another risk that arises from international operations and the subsequent need to send and receive money across borders: currency risk. Change is once again at play - this time in the form of fluctuating exchange rates, which have the potential to drive up the cost of your international payments.

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Currency risk

Currency risk

Whatever international markets you operate in, cross-border payments are par for the course. Often this involves transferring funds from your office in one country to your office in another - a regular flow of money between currencies that is vital to the successful operation of your business.

These funds are your lifeblood. If the amount of money reaching your account overseas is dented by currency risk, your ability to manage essential outgoings will be compromised - from paying local suppliers and international staff to covering overheads.

Currencies are traded around the clock - 24 hours a day. Therefore, the value of the pound against other currencies is constantly changing - not just daily but by the minute. Why do they fluctuate in value? Currencies strengthen and weaken each day because banks and investors purchase huge volumes in response to political and economic news. Positive news about a country typically causes the value of the currency to rise (“strengthen”), while bad news causes it to fall (“weaken”).

We also know when they might move because we often know the timing of political events that might influence them, and the economic calendar shows us when influential economic data will be released. However, there will also be news that happens without warning - anything from a US president tweeting late at night to a fall in the price of bauxite.

What we cannot predict – and no one can – is whether they will move up or down or by how much. Even slight fluctuations can make a big difference to the amount of money that arrives in your business’s overseas account. In some instances, the impact of the political and economic variables that influence exchange rates can be severe, as has been proved in recent times. Take Brexit and the Covid-19 pandemic for example:

Brexit: On 23 June 2016, the UK voted to leave the EU - a decision that took markets by surprise. Last-minute polling suggested that ‘remain’ had the edge, so when the Brexit result reverberated around the world the pound fell off a cliff, experiencing its largest intraday collapse in 30 years.

Covid-19 pandemic: Back in March 2020, when the true extent of the Covid-19 pandemic became clear, the pound sunk to its lowest level against the dollar since 1985 and its lowest level against the euro since the depth of the financial crisis 11 years earlier.

Fast-forward over 20 months and the emergence of the new Omicron coronavirus variant is perpetuating the impact of the pandemic on currency markets - yet more uncertainty that is keeping the pound pinned down.

Transfer fees

Currency risk is not the only thing that can give you a financial headache when sending money between international offices. If you use a bank to facilitate your international payments, you will probably be hit with hidden transfer fees as well. They typically charge up to £30 per transaction, which quickly adds up if you need to make regular international payments.

Engaging the services of a currency specialist is anything between 2-3% cheaper than a bank - not only because you will receive a better exchange rate; you won’t be charged an international transfer fee either.

International transfer fees have been making headlines since Briain departed from the European Union (EU) after some European banks hiked the cost of payments to and from the UK post-Brexit - a source of consternation for businesses with international payment requirements who feel the charges are unjustified.

Under the Single Euro Payments Area (SEPA) - created by the EU to harmonise the way cashless payments are transacted across Europe - banks are prohibited from charging more for cross-border payments than domestic ones, whether made in euros or not. Despite this, banks in Italy, the Netherlands, Portugal, and Spain have been charging higher fees to send and receive money from the UK - ranging from flat fees of between €12 - €18 for receiving a payment, to charges of between 0.3 - 0.5 per cent for sending or receiving larger amounts.

When quizzed about their actions, the banks claimed that rules controlling the cost of international payments ceased to apply post-Brexit - and they might have a point after the European Payments Council, which runs SEPA, referred to a July 2020 statement from the European Commission: “After the end of the transition period, the EU rules in the field of banking and payment services...will no longer apply to the United Kingdom,” including ones governing cross-border payments.

Thankfully, the transparent service currency specialists pride themselves on can remove any barriers that prevent you from making cost-effective cross-border payments.

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          Digital international payments

          digital international payments

          Cross-border businesses typically rely on traditional banks to facilitate their international payment requirements. However, that banks’ diverse offering means their resources aren’t focused on securing competitive exchange rates, providing a transparent service or ensuring funds are sent as quickly as possible - depriving them of the agility and innovation that’s needed to send and receive money overseas seamlessly and cost-effectively.

          Decision-makers are left to contend with complex payment infrastructures, processes and systems that lack sufficient integration - but the tide is turning. Cross-border businesses are becoming increasingly aware of poor pricing and service provision within the international payment sphere and the subsequent need for an integrated, technology-led solution that supersedes the traditional methods used by incumbent banks.

          Currency specialists provide access to innovative payment technology that’s designed to make it quick and easy for businesses to execute peer-to-peer transfers and reduce the cost of doing so - propelling international payments into the digital age. Their novel tools and techniques include: intuitive online payment platforms that enable businesses to automatically track rates and send and receive funds globally 24/7; and mass payment solutions that are designed to securely handle mass payments to multiple currencies at once.

          This comprehensive technology infrastructure is always underpinned by a personal service - because sometimes you will want to speak to an expert over the phone. A currency specialist will assign you with an account manager who will take the time to understand your business’s objectives and risk appetite, before helping you establish a robust hedging strategy.

          They will monitor the driving forces behind currency market movements on your behalf, allowing you to make informed risk-based decisions around the timing of your transfers. They will also discuss the tools that can be used to hedge your currency risk – from technical options to more simple resources.

          Clear Currency

          Currencies

          Clear Currency specialises in helping businesses that operate internationally to save money and execute safe and speedy transactions when making international payments.

          Transferring large sums of money into another currency and transferring them overseas can be daunting and confusing. Aware of this, we use our knowledge and experience to cut through the jargon and provide you with a friendly and personal service.

          We recognise that it’s impossible to accurately predict how exchange rates will perform; therefore, it’s prudent to plan for all eventualities. In addition to helping you benefit from quick, easy, reliable and secure transfers, your dedicated account manager can mitigate the impact of currency risk on their value.

          Your business can’t afford for international payments to be delayed or inflated in price. Therefore, it’s vital that they are made on time and you know exactly how much you will receive once they are executed. This brings the need to protect their value from currency market risk into sharp focus.

          Your account manager will work in partnership with you throughout the international payment process. For example, before you make an international payment they can prevent the cost from escalating, so you receive the required amount. Because fluctuating exchange rates make it hard to judge how much you’ll pay at any one time, your account manager can help you execute a forward contract to secure the cost of each payment. This allows you to lock in an exchange rate for a date in the future, securing the price of your payments when the time comes to execute them.

          Having secured the value of your international payments, it’s time to ensure they're efficient - after all, you’re going to be making a lot of them. Rather than executing them manually, your account manager can help you automate each transfer around your specific schedule - whether it’s weekly, monthly or more irregular intervals - using a regular payment plan. This vital tool allows you to set up convenient, fee-free automated payments that make managing your finances a whole lot easier.

          Move currency globally

          Bank-beating international payments



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