With advances in technology, geographic location is no longer a barrier to trade. And while access to international markets brings great opportunity, it also presents a number of challenges. Business money transfer is one of the areas that you will need to address eventually, and there are certainly a lot of services out there willing to help. So how can you find the right one for you?
A little bit of research will help you navigate the chaos. As will a touch of guidance from someone who understands it. If you go it alone, you may be missing an opportunity to refine your business practices and make your budget go further. That’s where we step in; to help you identify what you need, and find a service that will help you get the best result.
In this post, we’ll take a look at business money transfer, and see what’s important when undertaking commercial cross-border payments. If you intend on making a transaction for personal purposes, you might be better off reading our guide on how to send money online.
Understanding your requirements
Before you select a service for business money transfer, it is helpful to take a minute to think about what you actually want to accomplish. You’ve probably figured out by now that using your bank can be expensive, and that money transfer services offer a cheaper alternative. But not all services are the same, so it will help to refine your criteria a little first.
You most likely have a strong relationship with your bank. Banks are an essential service, and they offer many financial products to help you establish your business and keep it growing. However, you may not be surprised to know that they do not always have your interests at heart. Business money transfer is a big source of revenue for banks, and they have to make their profit from someone. In case you’re wondering, it’s from you!
Here are a few questions that will help you frame the problem at hand:
- How much do you need to transfer?
- How often will you be making payments?
- What time frame you need the funds to be delivered?
- Is it important that you transfer at the lowest possible cost?
- Do you need advice from a foreign exchange expert?
- Are you prepared to pay a little more for a personalised experience?
- Do you require to access to advanced tools such as forwards, options and market orders?
These questions are not too complicated, however, they will help you structure your thinking so you can identify the features that matter. For example, making a large, one-off payment for purchased equipment is very different from making regular payments to international contractors. A money transfer service that is fit for one purpose, is not necessarily optimised for another.
Once you’ve considered these questions, you’ll be in a much better position to dive into the various solutions out there. By taking a birds-eye view of the business money transfer market we can explore the common themes shared across services. This will serve you well in making a final decision.
What types of services can be used for business money transfer?
Generally speaking, the services that allow you to engage in business money transfer can be placed into three broad categories; peer to peer services, international payment specialists, and total payment solutions.
1. Peer to peer services
Peer to peer services are those that have been created to solve a very specific problem, often by utilising the latest technology. Instead of entering the foreign exchange market, where possible, these services aim to use their customer’s own funds to satisfy the requirements of other customers. They do not intend to be all things to all people, and that is why they can be very effective.
There are a couple of key features that separate a peer to peer service from the rest of the pack. First, they are designed for a limited purpose. For the most part, they aim to reduce transfer costs across a limited selection of currency corridors. They also use technology to their advantage, developing user-friendly online platforms to simplify the customer on-boarding process.
Generally speaking, a peer to peer service can complete the following transactions:
Spot contract. A spot contract is a single transaction at the currently available exchange rate. It is the most basic form of payment there is. It involves a transfer of funds from one country to another, involving the exchange of currency. The payment can be made to a bank account owned yourself or a third party, depending on the circumstances.
Recurring payment. A regular payment is a transaction that can be scheduled on a recurring basis. This can be suitable when you need to make the same transaction over and over again. For example, to satisfy mortgage repayments or an employment contract. Some services allow you to manage this process online, while others can arrange this after speaking with customer service.
Peer to peer services are predominately online only, which is ideal if you are comfortable with using technology in a self-directed way. They pay special attention to ensure that their product is clean and functional, and that there is plenty of phone support available. This business model allows them to perform transfers at the lowest possible cost, which often makes them market leaders in this area.
Of course, there are a few downsides. They are often limited in respect to what countries they can accept customers from, and what countries they can deliver funds to. Because these services achieve most of their efficiencies from establishing their own payment infrastructure, this leads them to focus only on popular corridors, at least in their formative years. Also, their transfer options are generally quite basic, so little advanced functionality is available.
- The most competitive rates on the market
- Transacting along major currency corridors
- Completing transfers of almost any value
- Users who are comfortable with technology
Our favourite: TransferWise (review). The market leader in peer to peer payments, TransferWise is an innovative service led by an energetic founding duo, including one of the first employees of Skype. The service facilitates transactions at the mid-market rate, and they charge a low transparent fee. It has received a lot of praise from its customers and is supported financially by many well-known investors.
A good alternative: CurrencyFair (review). Headquartered in Ireland, CurrencyFair is a well thought out payment platform focusing on major currency corridors. They employ a technology-focused workforce who are attempting to make the transfer process as efficient as possible. Its cost structure is in line with the other peer to peer market leaders, and they are constantly building additional functionality for the benefit of their users.
|wdt_ID||Service||Currencies||Speed||Ave. cost||Our score||Review|
|1||CurrencyFair||18||2-4 days||TBC||5 stars||Read review|
|6||OrbitRemit||40||1-3 days||0.43 %||4 stars||Read review|
|14||TransferWise||59||1-3 days||TBC||5 stars||Read review|
2. International payment specialists
International payment specialists are effectively foreign exchange brokers who aim to provide a broad suite of money transfer products. They can advise on a range of advanced tools, such as forward contracts, options and market orders. Their services are perfect for commercial operations and those conducting large or complex transfers.
In most cases, an international payment specialist employs foreign exchange dealers to provide advice, as well as conducting trades on your behalf. In recent times, most of these services have also developed online platforms, so you can conduct simpler trades without having to speak with a dealer directly.
Generally speaking, in addition to spot contracts and regular payments, an international payment specialist can also complete the following transactions:
Currency forward contract. A forward exchange contract allows you to lock in the current exchange rate for a payment which you intend to make at a later date. It is an advanced tool used to hedge against future movements in the market that may be to your detriment.
Foreign currency options. An option is an advanced tool that provides you with the right, but not the obligation, to purchase a specified amount of foreign exchange in the future. It often requires the payment of a small premium to acquire the option and is useful when there may be a need for foreign currency in the future.
Market order. A market order allows you to set a preferred rate that you might like to buy or sell currencies at, in the future. It is essentially an alert that will notify you when a currency pairing reaches a specified rate. You then have the ability to enter into a transaction at that rate, or some services can even do this automatically on your behalf.
The greatest benefit of using an international payment specialist is probably being able to speak with a professional dealer. If you prefer, they can hold your hand through the process and ensure that you are aware of all your options before you commit. Many services use an existing payment infrastructure, such as SWIFT, which increases the number of destinations that you can transfer your funds to.
However, with extra personalisation and attention comes an additional cost. When compared with peer to peer services, you’ll find that international payment specialists are slightly more expensive. This is partly due to the advanced products they offer, and also due to their use of the SWIFT payment network.
- Medium to large transfer values
- Those who would like tailored advice
- Making payments to a broad selection of countries
- Advanced tools and risk management strategies
Our favourite: HiFX (review). A service with a lot of experience in foreign exchange. HiFX provides their customers with a personalised experience and can facilitate transfers of any amount. They make payments into over 170 countries around the world, and funds are transferred at competitive rates. Their online platform is robust, and advanced tools can be accessed by speaking with their dealer desk.
A good alternative: Currencies Direct (review). This London based service offers a broad range of foreign exchange products. While its website is rather limited in functionality, the service does employ well-qualified dealers who are more than happy to advise you on your requirements and transact with the markets on your behalf.
|wdt_ID||Service||Currencies||Speed||Ave. cost||Our score||Review|
|2||XE Money Transfer||60||2-4 days||0.54 %||4 stars||Read review|
|5||HiFX||60||2-4 days||0.45 %||4 stars||Read review|
|8||Currency Online||60||2-4 days||1.50 %||3 stars||Read review|
|11||TorFX||42||2-4 days||2.12 %||3 stars||Read review|
|12||Currencies Direct||42||2-4 days||1.79 %||3 stars||Read review|
|20||RationalFX||48||2-4 days||1.16 %||3 stars||Read review|
3. Total payment solutions
The final type of service for business money transfer that you should be aware, is what I’ll call a “total payment solution”. A total payment solution offers most of the features offered by an international payment specialist, with a few additional bells and whistles. They have gone to extra effort to include as many tools as possible, for businesses that are conducting cross-border transactions.
While these two types of services do overlap to a degree, I’ve done my best to separate them out. The main difference is that they have usually established corporate entities in a more than one country, as not have complete reliance on existing payment infrastructure, such as SWIFT. They can also hold your funds on trust, which makes them part foreign exchange broker, part bank, without going to all the compliance effort of actually becoming a bank.
Generally speaking, in addition to the payment types offered by an international payment specialist, a total payment solution may have one or both of the following capabilities:
Multi-currency account. An ability to establish virtual bank accounts for you in foreign currency denominations. This is most useful for entrepreneurs and businesses who accept payments from various parts of the world. A multi-currency account is a useful alternative to having a fully-fledged foreign bank account in another country.
Bulk payments. If you would like to make mass supplier payments or refund a group of customers, a bulk payment solution is your answer. Many services allow up to 500 recipients to be paid by uploading a CSV file and confirming the entire transfer with one instruction.
A total payment solution is a great option for those businesses who manage overseas operations, whether it be accepting revenue from other countries, or managing payments to vendors and suppliers. These are very useful features to have in a product, and as the internet continues to mature, I think we’ll see more services begin to offer similar capabilities.
- All the benefits of an international payment specialist
- Sending and receiving payments in multiple countries
- Making payments to a large volume of recipients
- Streamlining complex requirements into a simple solution
Our favourite: OFX (review). As a publicly listed company, OFX is one of the market-leading money transfer services in the world. They aim to provide truly global business money transfer solutions. While not the cheapest service available, the breadth of services offered by OFX is second to none. A thorough solution for small and medium businesses conducting trade internationally.
A good alternative: WorldFirst (review). A reliable service for business money transfer. Competitive rates, advance foreign exchange tools, and a broad selection of international offices, allow the company to provide a consistent experience to its customers. WorldFirst offers a high-quality online platform which facilitates transfers, as well as provides access to market research and commentary.
|wdt_ID||Service||Currencies||Speed||Ave. cost||Our score||Review|
|3||WorldFirst||43||2-4 days||1.11 %||4 stars||Read review|
|4||OFX||55||3-5 days||1.20 %||4 stars||Read review|
Comparing services to select the right one for you
By referring to the categories listed above, you should now have at least an idea of the services that can help you with business money transfer. It’s important to recognise, however, that each service within a category can vary greatly.
Here are nine basic questions you should ask yourself before signing up:
- Is the service transparent about what they do?
- What currencies does the service support?
- What is the overall cost of a transfer?
- Is the transfer speed acceptable?
- Does the service offer the required features?
- Is customer support easily accessible?
- Is the service safe?
- Is the service reputable?
- Is the service easy to use?
Before getting too excited and jumping straight in, you should try to compare a couple of services against each other. That way, you will reduce the chances of being disappointed later on. If you’d like to know more about what to look for, check our guide on how to compare money transfer services.
Signing up with your chosen service
Once you’ve chosen your preferred service for business money transfer, it’s time to sign up. Each service has a slightly different registration process, but for the most part, they have similar requirements. First, you need to visit their website and sign up using an email and password. Shortly thereafter, you’ll need to provide the service with your contact information, such as an address, phone number, and often some indication of the foreign exchange capabilities that you would like.
Most services will require that you provide an assortment of documents to verify your identity, your business’s registration, and your eligibility to use the service. This is in line with the standard Know Your Customer (KYC) procedures that financial institutions are required to comply with. Nevertheless, whichever service you choose, you should be up and running within a day or two.
Making your first transaction
Following registration, making your first transfer should be quite simple. If you are comfortable with transacting through an online platform, simply login to their website and follow the instructions presented on the dashboard. If you are transferring a larger amount or have complex requirements, it may be best to contact their foreign exchange desk to have a dealer conduct the transaction on your behalf.
After your transaction has been initiated, most services will keep you updated via email as the payment makes its way to your recipient. The status of each transaction should also be able to be viewed on the dashboard. Eventually, you will be notified that your funds have been received by the service and will be delivered shortly. It usually takes a day or two from this point to see the funds reflected in your recipient’s bank account.
In this post, we’ve gone through the process of identifying your requirements when searching for business money transfer solution. We have identified that foreign exchange services for commercial organisations can be split into three broad categories; peer to peer services, international payment specialists and total payment solutions. Each type of service is structured slightly different, in terms of the features that it offers and its cost.
By referring to these categories, you can more easily pinpoint the types of services that will be helpful in achieving what you need. We have also provided you with the criteria to compare each service against one another. This will help you narrow your search to a service or two, whereby you can commence the sign-up process and complete your first transaction. By following these steps, you are more likely to be happy with your overall experience.