The expansion of businesses beyond the UK borders has been rampant in the recent past, with international and export revenues growing exponentially. Therefore, to thrive in doing business overseas, businesses must identify the best purchasing and payment approaches to adopt in a way that their profit margins can remain competitive. This, however, is accompanied by several international challenges which include handling multiple currencies, tax compliance, and dealing with international business payment methods. Most businesses choose simplistic approaches in making international money transfers, which end up exhausting a huge part of the profits that the business has generated.
Unfortunately, many businesses are not aware that they are being charged heavily than they should be paying for international money transfer services. This article will look at the various ways of making business payments overseas, the traditional approaches of international money transfer, the involved costs, and other available platforms of international money transfer in the UK.
Defining International Money Transfer
This is the moving of money in specific currencies electronically from one bank account to another bank account in a different country through money transfer networks. There are various ways of transferring money internationally. These include money transfer companies, high street banks, or foreign exchange intermediaries. Choosing the right method to adopt to transfer money for your business internationally depends on several factors. Such factors include the amount of money being transferred, the cost of the transfer, the urgency of transfer, and the means through which the receiver is supposed to get the money.
SWIFT Money Transfers
For every money transfer through a high street bank, use of SWIFT banking is something that every client needs to know. Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a global cash transfer standard that allows all the participating banks to keep money moving globally. Most banks across the globe might not have the necessary infrastructure for money transfer, which is what SWIFT provides.
Every participating bank is given a unique SWIFT Code, commonly known as Bank Identifier Code, identifies every bank with details of their location and addresses.
How International Money Transfer Works
Making international money transfer for your business is a more straightforward process than you could imagine. This process may vary with different banks and different money transfer companies. Some banks and companies will allow you to transfer money electronically via an online platform such as an app. Others use the traditional ways such as the use of mail forms while others will require you to visit your local branch to have the process initiated physically.
You will be required to provide some vital information before the transfer is made, including the following;
- International bank account number of your recipient
- Receiving Bank Details
- SWIFT Code of the receiving bank
- The amount to be transferred and the currency it is to be received in
- The reason why you are moving the money
- The person liable for transfer charges, whether it is you or the recipient or both.
After submission of these details, money is electronically wired to the recipient’s accounts. Some banks and money transfer companies will liaise with the recipient’s bank to ensure that money has been wired safely and to the right person. This is in efforts to curb international fraud in the money transfer industry.
What It Costs to Transfer Money Overseas for Your Business
The cost of transferring money overseas for your business may vary with different banks and different money transfer companies. Most UK businesses involved in international money transfer through banks are surcharged some hidden costs which one is rarely aware of until all transactions are completed. It is essential to monitor the currency exchange rates because these affect the total cost of transferring money internationally.
Generally, there are fees that are associated with international money transfer, which include;
The Transaction or Sending Charges
Some banks and money transfer companies provide a fee-free transaction to their customers. However, some banks and companies will charge a specified amount of money for every transfer that you make.
Some money transfer platforms and banks will charge the recipient some receiving fee, although you can always request to cater for the receiving fee yourself.
Foreign exchange rates keep changing daily. These are charges you pay for to have money converted into suitable currencies for the recipient. Most banks will set exchange rates that are in their favour.
Commission costs are charged per every transaction by most high street banks. This is rare in most of the other money transfer platforms.
How to Pay or Send Money Abroad for Your Business
There are different ways through which you can pay or send money for your business internationally. These methods include the following;
Online Bank Transfer
Different banks offer different means of international money transfer. You should research what your bank offers to know the method you will apply to pay or send money abroad. Some banks offer an online platform where you can facilitate your transfer without necessarily visiting the bank. This is how an online transfer works;
Browse through the Bank’s Website
In case you are not signed up for an online account with your bank’s website, then you will need to create one. Some banks have online apps which make the online transfer a lot much easier. While logged in into the bank’s website, navigate through the ‘wire transfer’ section where the money transfer business happens.
Set Your Transfer Limit
You will need to set a transfer limit for your transfer. Some banks will have the limit set for your depending on their money transfer policies. To verify that money transfer is validly done by you, most banks will have a security feature where they will send you a code to your phone or your email for verification.
After setting up the transfer limit, you will be required to enter the recipient’s details, as mentioned above.
Enter Amount and Suitable Currency for the Recipient
By entering the recipient’s details, especially the SWIFT Code, the recipient’s country’s currency is automatically generally. If that is not the case, make sure that you key in the right currency and amount you want to be transferred.
Pay for Transaction Charges
You will be required to pay for the transfer transaction. Different banks have different charges for international money transfer. Once you have paid for the transaction fees, you will be updated on how long the transfer will take.
In-Person Money Transfer
You will need to confirm with the bank of your intentions to set up international money transfer in person. This is how in-person money transfer works;
Submit Your Banking Details and those of the Recipient
You will be required to bring in your banking details such as bank account number, your name, and proof of identity documents such as ID or passport. If you are dealing with a company bank account, then you will need to have at least one signatory with you. You are also to submit your recipient’s details as outlined above, including bank account, SWIFT code, and suitable currency.
Notify the Bank on Amount You wish to Transfer
Deciding how much amount you want to transfer and the currency in which you want the money received by your recipient affects transaction costs. You must, therefore, ensure that you doublecheck with the bank for the right amount and currency.
Pay for Transaction Charges
Based on what the bank charges for international money transfers, you will be required to pay for specific costs such as the sending fee to facilitate the transfer.
Once you complete the transfer process, your bank will inform you of how long the transfer is likely to take.
Alternative Money Transfer Services
Today, there are more options of financial transfer services that businesses can choose from, which are cheaper and faster than the traditional bank transfer services. These financial tranfer services are handled by Fintech companies. Fintech companies have come up with innovative use of the technology to offer efficient delivery of financial transfer services. This has made transferring international transfer of business funds convenient, transparent and more importantly faster that the use of bank transfers. Such Fintech companies include Western Union, PayPal, and TransferWise.
Western Union is an overseas transfer service that dates its inception back in the 19th Century. This service has been recognized globally, with over 200 countries active in its usage. You should ensure that your recipient’s country and bank have Western Union wiring before deciding on using this service. Although Western Union is not as fast as other modern services, it is considered to be relatively cheaper. It is even less expensive when wiring money into a Western Union Branch in a country.
PayPal is an online money transfer service that has become popular for online transactions and international payments. Charges in PayPal may vary with currencies and countries. However, PayPal provides fee-free transfer for customers whose bank accounts are wired with their PayPal accounts. With the difference in exchange rates over time in use of PayPal, it is vital to evaluate how much you will get in the destination currency, to determine whether it is suitable for your business.
TransferWise is also an online platform that utilizes local bank systems to move money locally into individual bank accounts. TransferWise allows you to keep your money in different currencies which you can use to send or receive money through local bank accounts across the globe.
What to Consider When Identifying Money Transfer Service Providers
Choosing the right money transfer service provider would translate into making significant profits through the reduction of unnecessary costs. The following are factors to consider when selecting a money transfer service provider;
Exchange rates fluctuate daily, with cases of these fluctuations happening within a short span of time. Getting exchange rates that are in your favour is vital in ensuring that you get value for money in your international transfer. You should ensure that exchange rates offered by a particular service provider are what the destination currency reflects. You should also keep in mind that some service providers with favourable exchange rates could have other high charges and hidden costs.
For businesses that make international money transfers on a regular basis, transfer charges could have adverse effects to such businesses if they are not favourable. You should evaluate the particular offers provided by different service providers on transfer charges. For example, some banks will subsidise costs after using their services for a specific duration of time. You can also research on service providers with cheaper non-urgent payment offers.
Customer Support Service
Having an efficient team that keeps you posted right from account set-up to making money transfer is essential in the money transfer business. You should check out on service providers that have an efficient customer support team as well as customer communication avenues such as phone numbers, emails, or mails.
Speed of Transfer
How quickly money gets into the hands of business stakeholders, suppliers, or employees, is an important aspect to consider when choosing a money transfer service provider. A reliable service provider should be able to communicate how long it takes to transfer money overseas.
Flexible Transfer Facilities
If your business is highly involved in international deals and operations, then you will require a service provider whose transfer facilities are flexible and favourable to your business. For example, how many times can you transfer money in a week or month? Do they have forward contracts where you can book an exchange rate for transfer in the future? How flexible is the service provider in allowing you to get the exchange rate that you want?
Time Taken to Make an International Money Transfer for Your Business
International Money Transfer through wire transfer platforms is generally fast and reliable. The time taken to make a single transfer varies with different banks. Every service provider has a different timeline provided for different transfers. However, several factors affect the time taken to transfer money overseas, including the following;
Transfer on Weekends
Weekends are likely to prolong the money transfer time. Most banks consider weekends to be off-work time for their employees. You, therefore, might want to make arrangements to have your transfer done on a normal working day for a swift transfer. You should also keep in mind that weekends are different across the globe. For example, in some countries such as Egypt and UAE, weekends run from Friday to Saturday.
Transfer Service Provider
Different service providers have different speeds of facilitating money transfer internationally. You will need to research the best service provider for quick transfers.
Destination Currency and Country
Some countries have poor banking infrastructure which affects the duration that it takes to complete an international transfer. It is also expected that when the destination currency is different, then the transfer time is delayed.
Transfer during Holidays
You may need to be conscious of holidays both in your country and in your recipient’s country. Some countries across the globe will shut down banking systems during major holidays. This automatically affects the time it takes for the money to get to the recipient.
Countries and banks across the world have strict laws and regulations that govern international money transfers in efforts to mitigate fraud and money laundering. As a result, some banks will have extra security checks on international transfers, which may delay the transfer.
Error in Banking Details
This is the most common factors that contribute to the delay in money transfer. Errors made in the submission of banking details for your recipient or even yours could result in loss of that transfer or a stressful process of recovery which prolongs the transfer duration. You should crosscheck all your banking details and those of your recipients to ensure that they are accurate.
How Safe is International Money Transfer for Your Business in the UK?
Banks and service providers dealing with international money transfers are regulated by the Financial Conduct Authority (FCA) which safeguards transactions made overseas. In case of likely losses to your business, FCA has established a Financial Compensation Scheme that compensates you for the losses incurred. However, you must ensure that your transfer service provider is registered and mandated by FCA to carry out financial services. Otherwise, your business might suffer loss without compensation.