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Stop wasting money paying overseas suppliers in US dollars - there are more cost-effective alternatives

Stop wasting money paying overseas suppliers in US dollars - there are more cost-effective alternatives

When deciding to do business overseas you might have thought that using US currency (USD) for your transactions versus the local currency of the supplier was your simplest option, but if you pay attention to the entire transaction process, going this route leaves you and your business susceptible to paying double the conversion fees.

With the US dollar currently in decline due to the expected sell-off in US Treasuries turning disorderly last week, as stated in our latest weekly currency analysis, paying vendors in USD will cost you more than you think.   

When paying vendors in foreign currencies, the conversion rate is only one part of this costly equation

The more financial institutions and intermediary businesses that get involved in the transaction process when you are paying an overseas vendor, the more the transaction costs.

Here is an example of what that looks like:

Say you have a vendor that is based in China and you paid your vendor invoice in USD. Your initial transfer from CAD to USD to fund this payment created the first conversion fee from your bank. Then you paid your invoice with your USD funds, which must be converted to CNY to pay your Chinese vendor, creating another conversion fee on top of this. Here is a list of the players that are involved in this transaction and how they also take their cut:

  • Your bank you are using for your initial currency exchange of your CAD to USD to pay this vendor will charge a fee for exchanging this currency
  • Then your bank charges you a fee to process an international wire transfer to make the vendor payment, which can range anywhere from $10-$50
  • In most cases, an intermediary bank is required when paying a vendor internationally and when used they take an additional processing fee
  • The beneficiary bank for your vendor will also take a fee when the payment reaches their bank account
  • And additionally, there will be another conversion fee to transfer your USD funds into the local currency, CNY, to complete the payment

When all those steps are finalized, you end up paying an additional sum of upwards of 7 percent. You, and your business, also shoulder the risk that your currency could lose value in transit due to fluctuating currency exchange rates between the time of your invoice payment and the final settlement, which as you can see from the above example, is lengthy.

Why you should be paying in local currency instead of USD for your foreign business transactions

Innovative fintech’s have emerged in the category offering local in-country payment solutions that can save your business the fees listed in the above example while at the same time, reduce your businesses FX exposure by giving you the ability to make payments and hold funds in multi-currency accounts that you can access any time, 24/7, removing the need to make costly currency conversions.

Not only can you save on processing and currency exchange fees with local in-country payments, but next-generation solutions from fintech leaders in the space, like MTFX, can also enable direct integration of these solutions into your businesses ERP system, removing all the manual reconciliation work that is normally required to balance and record your overseas business transactions.

MTFX’s international payouts solution provides your business access to +100 currencies and is compatible with all of the top ERP systems in the market including, Quickbooks, Oracle, SAP, Dynamics 365, Sage, among others. This solution facilitates, through API automation, the generation of your payables as well as the settlement of your overseas business payments, all in one easy-to-use portal so you can keep track of your cash flow.

Our platform can help you grow your profits

Learn more about how our third-party payment platform can help you retain your local customers and expand your business globally. Contact us and we will show you how our foreign exchange currency risk management and local in-country payment solutions can protect as well as increase your cash flow.

 

Suggested links for you:

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FAQs

Individuals and businesses who need to send money in foreign currency internationally can use MTFX’s services. The beneficiary of the transfer must have a bank account for the funds to be paid into. Personal clients usually use our services to transfer money between their own accounts in two different countries. Business clients usually use our services to transfer funds to suppliers, fund international operations, or repatriate overseas earnings.
MTFX offers currency exchange rates that are 2-5% better than those offered by the banks. Personal clients usually save hundreds of dollars per transfer and for larger transfers, the savings can run into the thousands. We also offer excellent customer service, dedicated currency specialists, and a 24/7 online platform with best-in-class technology that allows you to complete transfers from any device virtually anywhere in the world. Business customers save with better currency exchange rates and proven solutions geared towards managing and mitigating foreign exchange risk. Our solutions include forward contracts, market orders, rate alert services, and much more - all backed by great technology and great people.
Funds can be transferred via wire transfer, Electronic Funds Transfer (EFT), or ACH payment services. MTFX maintains bank accounts in all major currencies with highly-rated banks. Our banking infrastructure ensures that you can transfer funds to us quickly and securely.
Our global network of banking partners allows us to get funds to virtually anywhere in the world quickly and efficiently. Most wire transfers from MTFX will be received by your beneficiary within 24-48 hours. MTFX also offers same-day transfers that are almost instantaneous, as well as low-cost in-country payment services for your less urgent transfers. For further information please speak to one of our currency specialists.