For all that it is rewarding, being an international online seller is challenging all around. One of the biggest issues that sellers face is payments. Despite the fact that there are many global payment options available today, accepting money from buyers is still difficult. The problem is that the cost of such payments is so high it often eats up the seller’s revenue. Multi-currency accounts offered by some international money transfer providers can be an efficient solution. They vary greatly in terms and costs. Therefore, any online seller trying to make the most of the coronavirus pandemic-induced e–commerce boom must choose carefully.
Why Are Multi-Currency Accounts a Necessity Today?
International shipping, marketing, and other costs involved in selling anything globally make this a rather costly venture. Small businesses and private entrepreneurs, in particular, have it the hardest. Their profit margin from such sales is low by default, but it’s essential for their businesses’ survival in the competitive market of today.
Accepting payments from buyers abroad is rather easy at first glance. You can use Amazon’s payment system with its currency converter to keep everything straightforward. But alas, this will cost you no less than 4% of the transaction. For a small online seller, this is a big cut into their profit margin for every purchase.
PayPal is a more popular solution for international payments. It also has the advantage of being popular with buyers and accepted by multiple online marketplaces. However, each payment from abroad through PayPal might cost you from 3.5% to 5% of the transaction amount.
These rates are nothing less than predatory. Therefore, finding ways to cut the costs of money transfers is one of the seller’s priorities. Multi-currency collection accounts from international money transfer companies are a solution that allows one to achieve this.
Money transfer companies attract customers by offering cheap transfers. Their fees are low or they might not charge fees at all for some transactions. But most importantly, these companies offer low foreign currency exchange (FX) rates. Banks, PayPal, Amazon, and all other more “traditional” money transfer providers all use rather high FX margins. Therefore, every customer loses 1-3% or more of the transaction during the exchange.
Multi-currency accounts from these alternative money transfer providers minimize those losses. In fact, they allow sellers to avoid exchanging currency altogether in some situations.
How Does a Multi-Currency Account Work?
Multi-currency accounts are similar in their functions. However, their details are different depending on the provider. Therefore, you should take a look at a detailed multi-currency accounts comparison when choosing the best account for yourself. In general, however, these accounts work as following:
- The account enables you to hold money in several currencies without the need to convert one into the other.
For a seller, this can be a smart move if you need to pay suppliers in the same currency. In this case, you can simply use it as a chequing account and pay them directly from it. Therefore, you will avoid currency conversion losses completely.
- You can convert money in your account into your primary currency using the company’s favorable FX rates.
You choose how much money you want to convert and how much you will hold in any currency.
- You can withdraw money in your local currency after exchanging it.
- You can receive transfers in foreign currencies either for free or paying a small fee.
Such transfers are always cheaper if you skip the currency exchange step. Therefore, a seller gets a chance to keep their prices more competitive.
- You can use your multi-currency account for some simple FX trading.
You can switch between currencies when rates are favorable. Money transfer companies also offer hedging tools and advice on how and when to use them best.
Opening a multi-currency account with international money transfer companies is easy. These businesses are online-based. So you can easily set up and manage your account using a smartphone app. Usually, the account won’t be tied to your bank account directly to give you another layer of security.
What Are the Top Multi-Currency Account Available Today?
Multi-currency accounts are growing more popular, so more companies are offering this type of service. The leaders of the industry are:
WorldFirst was recently purchased by Alibaba’s Ant Financial. But it was originally a UK company and it remains one of the best to serve UK sellers in particular. It has bank accounts available in the UK, the USA, France, Germany, Canada, China, Singapore, and Japan. It offers a less than 0.5% spread margin.
Moneycorp is one of the oldest and most trusted businesses in the industry. Its multi-currency account is more expensive with a fixed margin of 0.75%. But this platform has won many awards and is exceptional in the quality of customer service.
OFX is a good choice for truly global sellers. It has bank accounts in the UK, the USA, the EU, Canada, New Zealand, Hong Kong, Singapore, and Australia. The margins on offer vary, but they are tight so your FX losses will be minimal.
TransferWise is currently the biggest money transfer company in the industry. This multi-currency account allows you to hold money in up to 50 currencies. The margins are tight and any fees charged are low.
The Future of Multi-Currency Accounts: How Does the COVID-19 Pandemic Factor in It?
Ecommerce has been growing rapidly over the last decade. However, the COVID-19 pandemic has given it a huge push. Since the start of the pandemic, online sales have increased by 76.2%. And in some countries e-commerce retail sales are still rising weekly.
All this means that now is the best time to enter the e-commerce scene or up your ante and go global. Therefore, now is the time to make the best use of multi-currency accounts.
This situation isn’t likely to change anytime soon. Even when the pandemic will be defeated, the e-commerce industry has been changed forever. This means that multi-currency accounts and international money transfer providers have a very bright future in the world that has risen to a new level of globalization.
We can fully expect new services of this kind appearing with even better terms as the competition in the industry grows.