Doing business on a global scale requires the ability to easily exchange funds internationally. If you are currently conducting business overseas, or you want to begin doing so, it’s necessary to learn about your options. There are tons of ways to send and receive money internationally, and there are different fees and parameters associated with each method.
In this article, we will discuss some of the most popular ways to conduct business with customers who live in other countries. Whether you are a retailer looking to add payment options, or a wholesale distributor, we will also have a look at the pros and cons of each of these methods. This will help you decide which payment methods to use in your business and which ones to avoid.
Table of contents
Cryptocurrency
Although still not part of the mainstream in terms of payment methods, crypto is one of the fastest ways to send, receive and exchange money. All you need is a virtual wallet and a cryptocurrency payment processing service to be able to do this. The only other requirement is that the person you’re doing business with must also have a virtual wallet that uses the same types of coins are your wallet.
For example, if a customer wants to pay you in Ethereum, but you have a virtual wallet that only accepts Bitcoin and Bitcoin Cash, you won’t be able to accept their funds. That’s why it’s important to have a multi-currency wallet if you’re going to deal in crypto. If your customers aren’t able to use the payment method of their choice, they are likely to take their business elsewhere.
Crypto is also easy to exchange between fiat currencies. If you’re in the United States and your customer is in Brazil, they can still pay you without worrying about exchange rates. They send crypto that was purchased with their own local currency. When you accept the crypto, you can keep it in your wallet or exchange it for U.S. dollars. It’s really that simple.
Stablecoin
This is a type of digital currency that is backed by physical assets such as gold, silver, and fiat currency. These coins were created as a way to invest for the long-term without the major volatility that is associated with other types of crypto. They are, as the name suggests, much more stable than traditional cryptocurrencies.
Stablecoin is categorized by the physical asset that is associated with its stability. There are three main categories of stablecoin, each with a unique type of support to shield them from volatility. These three categories are:
- Crypto-Collateralized
- Fiat-Collateralized
- Non-Collateralized
Crypto-Collateralized Stablecoin
As the name suggests, this type of stablecoin is backed by cryptocurrency. Generally, these coins are backed by a different cryptocurrency, in a larger quantity. For example, $2,000 in one coin might be kept in reserves to support and stabilize $1,000 worth of a different coin. In this way, the coin is 50% more stable than it would be without those reserves.
Fiat-Collateralized Stablecoin
These coins are backed by a physical fiat currency. Fiat currency, such as US dollars, are kept in a reserve and used as collateral to issue an appropriate number of crypto coins. Other valuables may be used in place of fiat currency, including silver, gold, and other commodities. Tether is a great example of this type of currency.
Non-Collateralized Stablecoin
These coins are not stabilized by a currency or another coin. However, they do include a mechanism that helps maintain their value, such as a bank or other central entity. The entity has the ability to increase or decrease the number of available coins, much like the US treasury can print additional currency to maintain the value of the US dollar.
FOREX Service/Company
FOREX is a great way to exchange currency internationally. The FOREX market is the foreign exchange market in which currencies are traded in pairs. For example, one trading pair that’s available in the FOREX market is USD/EUR. This is a pair by which Euros are traded against US dollars. There are hundreds of pairs in existence in the FOREX market.
The most common reason for trading the in FOREX market is for commerce and business purposes. Individuals can exchange their local fiat currency for that of other countries in order to purchase goods or services. Exchange rates vary from country to country and savvy traders will keep an eye on exchange rates to get the best rates possible.
In order to trade currency in this market, you will need to set up a brokerage account. There are a variety of companies on the market that offer this service. A simple Google search will help you find brokerage companies to explore prior to making a decision about who to use.
SEPA Wire Transfers
The Single European Payments Area is a system of transactions created to make digital payments between European countries easier. Any customers or businesses exchanging currencies between European countries who are included in the SEPA network are subject to the regulations of SEPA. The European Commission facilitates and regulates all SEPA activity.
Wire transfers within the SEPA network are fairly seamless and easy to conduct. However, if you live in a country that is not included in the SEPA network, you will not be able to use this system. In this case, you will need to look into other international transfer options. Alternately, you could open a bank account in one of the SEPA countries. This may be a good option if you do a significant amount of business overseas.
Prepaid Debit Cards
This is a more physical means of sending or exchanging money, but still a viable one. Many companies offer prepaid debit accounts that allow you to transfer money between cards. If you have a loved one who is overseas, this is a great option. Whenever they are running low on cash, you can simply transfer some money onto their card.
This is much less traditional for business than it is for personal use. However, some companies do use it for this purpose, if they have associates working in other countries who need purchasing power.
Lowest Fee Option Is:
Exchanging money internationally is sometimes really affordable and other times not so much. It depends on the method of transfer that you’re using and the timing of the market for that particular type of transfer. For example, crypto is fairly simple to use and generally extremely affordable. However, if you exchange your crypto for fiat currency at the wrong time, it could hold less value than other times.
In the same way, FOREX trading can fluctuate, as well. It’s important to understand how the market works and when to make those trades. Not all businesses have this luxury, so sometimes it’s best to stick with the standard wire transfer.
Depending on why you’re sending money overseas, you will find that different options are less expensive than others. Be sure to understand the differences in exchange rates before making your decision.
