USD—EUR transactions facilitate international trade and commerce across various industries. The two most widely used currencies globally, the US Dollar (USD) and the Euro (EUR), are at the heart of cross-border business operations.
Growing Significance of Euro in Global Payments
The United States dollar (USD) has long dominated international trade, but the Euro is gaining ground.
In March 2024, the Euro accounted for 21.93% of SWIFT transactions, while the USD held 47.37%. Most Euro transactions (57%) occur between Eurozone banks, making only 43% of Euro transactions truly international, equating to about 9.4% of global payments.
The significance of the Euro is also evident in its use as a reserve currency. By Q4 2023, it comprised 21.8% of global foreign exchange reserves, up from 20.5% in Q4 2022.
Growth of International Trade between the US and the Eurozone
USD – EUR trade has grown steadily. In 2022, the value of goods and services traded between the US and EU totaled $1.1 trillion. This growth is driven by removing trade barriers, harmonizing regulations, and increasing demand across both regions.
In 2023, US exports to the EU grew by 4.2% to $586.4 billion, while imports from the EU increased by 5.1% to $564.5 billion. The US trade surplus with the EU narrowed slightly to $21.9 billion.
Key sectors driving this growth include:
- Machinery and transport equipment: $270.1 billion in total trade
- Chemicals and related products: $167.3 billion in total trade
- Miscellaneous manufactured articles: $115.6 billion in total trade
Growth of International Trade in the Eurozone and Other Regions
As international trade between the US, Eurozone, and other regions like Asia and Africa grows, businesses seek more efficient ways to make international transfers.
In 2023, the Euro was used for 46% of extra-EU trade in goods, while the US dollar accounted for 42%. Currencies of other EU countries made up 2%, and the remaining 10% used other global currencies.
Major trading partners include:
- China (Chinese Yuan – CNY)
- UK (British Pound – GBP)
- Switzerland (Swiss Franc – CHF)
- Japan (Japanese Yen – JPY)
- Australia (Australian Dollar – AUD)
- New Zealand (New Zealand Dollar – NZD)
- South Africa (South African Rand – ZAR)
As international trade between the Eurozone and these regions grows in sectors such as machinery, transport equipment and vehicles, chemicals, electrical equipment, mineral products and precious metals, pharmaceuticals, and food products, businesses seek more efficient ways to make cross-border B2B payments.
Everyday Use Cases for USD to EUR B2B Transactions
The most common B2B transactions between the US Dollar (USD) and Euro (EUR) revolve around international trade and business operations.
Many businesses have local bank accounts in USD or EUR to facilitate USD-EUR transactions. This helps avoid currency conversion fees and streamlines B2B transactions. Having a multi-currency account that includes these and other currencies adds convenience and flexibility for European businesses and their partners.
Here are some of the key use cases:
- Receiving and Making Business Partner Payments: Paying European suppliers and vendors and receiving payments from European customers for goods or services.
- Paying Salaries and Benefits to European Employees: Paying salaries, bonuses, and benefits to local employees in euros, ensuring timely and accurate payroll processing.
- Investing in European Markets and Assets: Converting USD to EUR for investments in European stocks, bonds, real estate, or other assets to diversify portfolios.
- Repatriating Profits and Dividends: Converting euros earned in Europe back to USD for repatriating profits, dividends, or royalties, considering exchange rate fluctuations and tax implications.
Critical Considerations for USD to EUR Transactions
Businesses must navigate a complex financial, regulatory, and operational landscape when conducting USD to EUR transactions. Here are some key considerations to keep in mind:
Exchange Rates and Currency Conversion Fees
Businesses involved in USD to EUR transactions must stay updated with current exchange rates. Tools like a reliable currency converter assist in making well-informed decisions. Additionally, setting rate alerts for tracking currency rates can help identify the best times to convert USD to EUR.
For instance, if a company in the USA needs to send money to a supplier in the EU, choosing the optimal time based on exchange rate trends can result in substantial savings. Rate alerts for the US dollar help companies stay informed about fluctuations.
Transaction Speed and Settlement Times in USD to EUR Payments
The speed of USD to EUR transactions can vary depending on the payment method and network used. SWIFT wire transfers, for example, typically take 1-5 business days to settle, while SEPA transfers within the Eurozone can be completed within one business day.
Security Measures and Regulations
Security is paramount in USD to EUR transactions. Implementing the right measures and adhering to regulations helps protect against fraud and unauthorized transactions.
These are the key security measures and regulations businesses must follow:
Strong Customer Authentication (SCA)
Required under PSD2, SCA involves multi-factor authentication to verify the payer’s identity. For example, users confirm their identity with both a password and a unique code sent to their mobile device.
Data Encryption
Encrypting sensitive payment data ensures it remains secure, protecting against interception and theft. Encrypted data is unreadable to unauthorized individuals.
Fraud Monitoring
Real-time fraud detection systems help identify and prevent suspicious transactions. The system flags or freezes the account for review if unusual activity is detected.
Additionally, businesses engaging in USD to EUR transactions must comply with various US and EU regulations. These regulations include:
- GDPR: GDPR governs the collection, storage, and use of EU citizens’ personal data. Businesses must obtain explicit consent, protect data, and notify authorities of breaches.
- PSD2: PSD2 sets rules for electronic payments within the EU. It includes strict security requirements, liability provisions, and mandates opening banking data to third-party providers. Compliance ensures that electronic transactions are secure and seamless.
Non-compliance with these regulations can result in hefty fines and reputational damage.
Streamlining USD to EUR Payments with a Multi-Currency Account
Streamlining USD to EUR payments is crucial for efficient operations and reducing costs. Using a multi-currency account offers several advantages over traditional methods.
Hold and Manage Both Currencies
A multi-currency account allows businesses to manage USD and EUR in one account, simplifying international B2B payments. For example, a US-based company with European clients can receive EUR payments directly into their account. They can use the EUR balance to pay European suppliers, reducing the need for constant currency conversions.
Moreover, accounts like Bancoli’s Global Business Account offer even greater flexibility. In addition to USD and EUR, this multi-currency account includes currency accounts for GBP, MXN, CAD, AUD, HKD, SGD, PLN, and CNY. With the ability to send payouts in 50+ currencies across 200+ countries, businesses can streamline their international transactions significantly.
Minimize Currency Conversions
Using a multi-currency account reduces the need for constant currency conversions. Both partners can agree to use a common currency, settling transactions without frequent conversions.
For instance, a company receiving regular EUR payments can accumulate the funds and convert them to USD in larger batches. This helps secure better exchange rates and reduces conversion fees.
Save on FX Fees
A multi-currency account often provides competitive exchange rates and lower fees than traditional banks. According to a McKinsey study, businesses can save up to 75% on FX fees using multi-currency accounts.
For example, Bancoli offers access to real interbank rates, including an unbeatable 0.4% for USD to EUR conversions.
Global Business Account: Convenience Beyond USD to EUR
The Global Business Account (GBA) streamlines B2B payments globally, simplifying commerce in more than 200 countries. However, the value of this multi-currency account doesn’t end there. It offers a complete business financial hub to simplify global cash flow securely and efficiently.
Real Global Business Banking
The GBA can be opened and operated anywhere worldwide, making it a perfect option for non-resident businesses. This is especially useful for businesses based in a country different from their owner’s nationality.
Unmatched Fund Security
Bancoli’s USD Custody protects funds up to $125 million. This protection level is 500 times higher than that of regular US-based banks and up to 1000 times higher than that of EU-based banks. This ensures your money is safe, no matter the market conditions.
Account and Transactional Safety
Your GBA and every transaction you make is secured with military-grade encryption, multi-factor authentication (MFA), and real-time fraud monitoring.
In Conclusion
As the Euro gains ground as a major international currency, USD-to-EUR transactions become increasingly important. To streamline these payments and ensure compliance, businesses must navigate a complex financial, regulatory, and operational landscape.
Leveraging multi-currency accounts can provide significant advantages for businesses engaged in frequent USD to EUR transactions. These accounts allow businesses to hold and manage both the United States Dollar and the Euro, minimizing constant conversions and potentially saving on FX fees. Leveraging the right financial tools, like multi-currency accounts, ensures smoother transactions and secures financial efficiency and compliance in the competitive global marketplace.
