In the interconnected world economy, the ability to save on international payments is essential – particularly when the speed with which cross-border payments reach their destination is paramount. However, many businesses and individuals struggle with exorbitant operating fees and hidden costs associated with these transactions, including commissions, exchange rates, and storage and document management costs. The labyrinth of intermediaries—banks, agents, financial institutions—all contribute to inflating the final cost of your international operations.
How to save on international payments?
Hidden costs can substantially consume large amounts of your international payments and business transactions. Studies show that regarding cross-border payments, solutions should focus on savings: On the one hand, businesses are seeking new, cost-effective ways to make payments and reduce high FX fees. On the other hand, speed, cost, and convenience are the most important considerations driving cross-border expansion.
Here are 5 tips that will help you execute efficient and cost-effective international payments or collections and speed up your transactions:
1) Learn How Your Industry Handles International Payments
Understanding the common practices in international payments and collections within your industry is important to align with your suppliers and customers. Although there are often common or even standardized practices in certain industries, this knowledge will also help you become familiar with payment methods and pinpoint the most efficient and economic ones for your international transactions. Some of the most common mechanisms for international B2B payments include:
INTERNATIONAL BANK TRANSFERS
This method is the most widely used for international business-to-business payments. Its primary advantage is reliability, as transactions are conducted directly from one bank account to another. However, bank transfers can be costly and time-consuming.
CREDIT CARD PAYMENTS
Credit cards offer a convenient and agile payment method for suppliers and buyers. But the convenience may be undercut when payment processing fees are high. Additionally, the risk of card fraud makes this payment method more suitable under certain circumstances.
International online transfers or remote payment methods, like PayPal or Stripe, serve as good examples. These payment methods are typically fast but expensive due to the commissions charged on the total amounts.
Letters of credit and secured letters of credit are other payment methods worth noting. Both are common instruments in large transactions facilitated by banks.
2) Optimize Your International Payment Services
Electronic payment services, such as SWIFT, offer a unified solution to conduct international transfers. They achieve this efficiency by minimizing the number of intermediaries involved in the global payment process. This consolidation diminishes transaction costs, allowing businesses to realize substantial savings on international payments.
Selecting an optimal electronic payment service requires a thorough understanding of its market reach. For instance, a service like SWIFT proves beneficial when executing transactions between banks in Mexico or Argentina and a U.S. bank. Conversely, the Automated Clearing House (ACH) service is a more practical choice for domestic payments. It’s crucial to evaluate the fee structure of your chosen service to ensure it caters to your unique needs and aligns with your budget.
3) Strategically Choose the Right Currencies for Your International Payments
Currency exchange rates can dramatically impact the cost of your international payments. Hence, it’s prudent to monitor these rates constantly and select the most advantageous currencies for your transactions. Such vigilance assists in identifying the most convenient times for executing international transfers, particularly when your preferred exchange rate is unfavorable.
Comparing exchange rates among various financial institutions can facilitate informed and strategic decision-making for international payments. Alternatively, maintaining a bank account in a stable currency, such as the US dollar, can offer additional financial security. For even greater flexibility and competitive exchange rates, consider a multi-currency account like Bancoli’s Global Business Account, which can enhance the return on each payment.
4) Engage in Negotiations
One of the easiest ways to save on international payments is to negotiate with your buyer or supplier at the beginning of the business agreement. It is advisable to calculate the transactional amounts according to the agreed payment method and make agreements so that neither party is affected.
Keep in mind that conducting transactions through Bancoli offers you and your business partners the most competitive rates in the market. If you both have a Bancoli account, you can access all the benefits designed to boost your returns, from early payment discounts to Bancoli Reward Points (BRP) to waive certain fees. This way, the platform provides functionalities to enhance your business relationship.
5) Forecast Your International Payments Costs
A proven strategy for cost reduction involves making estimates before executing a transaction. Being privy to exchange rate estimates and pertinent commissions can prove invaluable. This way, you can foresee the transaction costs per the payment method and allocate funds accordingly.
To save on international payments, Bancoli provides a Global Business Account (GBA), an all-in-one solution that offers a range of features that simplify cross-border transactions, including:
- International banking with currency accounts for USD, MXN, EUR, GBP, HKD, and SGD.
- Seamless international payments for businesses in 10+ currencies to 200+ countries.
- Access to competitive global FX rates and minimal fees on every transaction.
- Schedule, issue, and automate tasks with Bancoli AI’s help, streamlining your cash flow.
Many businesses aim to conduct international business, but not all manage to make their cross-border transactions cost-effective. Our shared information will help you make informed decisions to save on each international transaction.
Join Bancoli and discover how we can assist your business in saving money on every payment.