The best business advice, opinion, news and expertise in Greater Manchester and further afield.

Friday, 7 December 2012

Friday Guest Blog

By Neil Kinnon, General Manager, TransGlobal Payment Solutions Ltd.

For most businesses the trading journey at some time leads to making or receiving payments in a foreign currency. Whilst most payments within the UK are fast and reliable, with both transparent and low pricing, the same is not true when transacting in foreign currencies. Foreign payments have traditionally been the domain of the UK banks that use their relationships with other banks around the world to exchange currency and execute the payments. Although there have been massive shifts in the direction of trade, little has changed in the last 50 years in the ways banks handle your payments. The key challenges with this old network is that it moves money slowly, it does not allow track and trace of payments and with multiple banks in the chain, each one adds to the cost of the transaction. If you add foreign exchange into the mix, you will also find a large chunk of your intended payment gets gobbled up as it moves around the world.

Whilst it would seem banks are the necessary plumbing to make international payments and foreign currency exchange, they do not offer the only choice for businesses. As banks have been slow to react to the changes in global trade, non-bank providers have risen to the challenge and now provide much better routes for your global money movement.

Non-bank providers fall into two broad categories. Foreign exchange (FX) providers such as TransGlobal Payment Solutions and internet payment service providers such as PayPal. In general the internet service is good for low value and one-off payments, whilst larger or regular payments abroad should be handled by specialist FX providers.

When choosing a provider (or comparing one with your bank) the following criteria will help in making your decision:

1. How good is their global payment network? Can they make payments directly into the country you wish to pay in without using multiple banks and without having to use costly wire transfers

2. How transparent is the pricing? Do you understand exactly how much you will pay for your payment? Many FX brokers offer free payments yet hide the cost of currency conversion, meaning the total cost of the payment is hidden. Ask the provider to contract to a payment fee, an agreed currency exchange rate and agreed fees should anything go wrong with the payment

3. Do they provide a simple, free to use on-line system for payments that checks your payment details are correct and provides clear pricing on each transaction? Error checking will reduce the high cost of repairs should a payment be rejected.

Following these three simple steps and you will both simplify and reduce the cost of your international payments.

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