As the internet makes its way even further into our everyday lives, there are more and more people who choose to do their shopping online. And with this increasing volume of shoppers comes an opportunity to sell your wares – to not only the people around you but also people all over the world.
Online marketplaces, such as Amazon and eBay, make it easier than ever to start a business of your own. But despite the convenience of these platforms, selling into a global market presents some challenges; namely, accepting, holding and making payments in foreign denominated currencies.
Luckily, there are a range of international payment specialists that have devised a solution; the multi-currency account. In this post, we’ll delve how a borderless account works and how they can achieve your goals.
What is a multi-currency bank account?
A multi-currency account allows you to hold a balance of foreign denominated currencies all in one place. They act like individual bank accounts, and in addition to holding foreign denominated currencies, allow you to make and receive payments in those currencies. Sometimes also called a borderless account, they are one of the newest cross-border payment products on the market.
Developed for both individual and commercial use, a multi-currency account is especially useful for the business models that have been established alongside the growth of the internet. They align themselves tightly with operations that rely on income sources from different locations around the world. For these businesses, the ability to hold a balance of foreign currencies can save unnecessary transaction costs.
Perfect for e-commerce stores that accept payment in various currency denominations, many multi-currency account services also integrate with popular online marketplaces such as Amazon, eBay, Etsy, Shopify, Walmart, and Jet. This is incredibly efficient for small commercial operators, but also freelancers and other individuals who simply would like an effective way of holding foreign denominated currencies without using cumbersome banking services.
What are they most useful for?
As I’ve mentioned, a multi-currency account allows you to hold various currencies, as well as make and receive payments in those currencies. This can be very useful, as it allows you to operate in regions of the world which would otherwise not be possible, or at the very least, be difficult and expensive. The result is that you can easily receive payments from customers in other countries, and also pay suppliers if required.
To accomplish this, each of your currency accounts is usually allocated its own internationally recognised bank details. That way, you are able to provide these details to any of your counterparties, and they can either arrange payment into this account or you can make an outgoing transfer from it. Here are some of the types of bank details you can expect to receive, to name a few:
- American account number and routing number
- Australian account number and BSB code
- British account number and sort code
- European IBAN
Some providers of borderless account solutions are more tailored towards everyday consumers than others. TransferWise (review), for example, can provide you with a debit MasterCard or Visa linked your multi-currency account. This is particularly useful if you are a freelancer or contractor who makes purchases online, or engages in other credit card related activities, such as booking flights or hotels.
A practical example
Let me give you an example of how a multi-currency account solution can work in a real-world situation.
Consider that you are a consultant based in the UK, but many of your clients are located in the United States. Maybe you are a software developer, website designer or maybe you run a small e-commerce store. The location of your customers doesn’t matter so much to you, but I’m sure you’ll agree that it will be most convenient for them to pay in their local currency.
However, this is not so great for you. If someone pays you in US Dollars, you’ll need to exchange that into British Pounds so it can be received into your UK account. This presents a problem; exchanging currency can get expensive. Banks, online marketplaces, and even money transfer providers are going to charge you to facilitate that. Or there is another solution; receive and hold US Dollars in a multi-currency account!
By doing this, you are taking more control over how and when you want to exchange money. Perhaps you have bills to pay in US Dollars also? It would be much easier to pay these suppliers with the US Dollars you have received from your clients, rather than making payment from your UK account. Either way, it is completely your choice if and when you’re ready to transfer your funds to the UK. And when you do, you’ll receive the benefit of working with a international payment specialist.
This leads us to introduce how a multi-currency account aligns with a money transfer service, and how this will benefit you in the long run.
A borderless account as an extension of money transfer services
Banks and other large financial institutions are the traditional providers of currency services, including foreign denominated bank accounts. However, these banks, despite their size and the strength of relationships with their clients, are often expensive. This means that they may not always provide rates that align closely with the interbank mid-market rate. And that, by the way, is why money transfer services exist in the first place.
Money transfer services specialise in foreign exchange and often do it much cheaper than traditional banks. Also, as of late, they have branched out to offer multi-currency account services to their clients. They offer the ability to establish foreign denominated accounts in a simple and seamless process, and in addition, any exchange with them is completed at much more competitive rate than usually offered by banks.
So, while international payment specialists are not technically banks, they can be used as a substitute for holding traditional bank accounts. Althoug, because they’re not fully fledged banks, they won’t be able to provide a full suite of financial services, such as loans, credit cards and investment advice. But they might be able to offer an economical payment solution for your international endeavours, including foreign exchange tools, such as a currency forward contract, an option or market order.
The benefits of a multi-currency account
Now that we understand what a multi-currency account is and how they work, what are the benefits you can expect from using these services?
- Receive payments in different currency denominations
- Hold payments in different currency denominations
- Send payments in different currency denominations
- Transfer between these currency accounts occurs at much more competitive rates than offered by banks
- Generally free to open and no ongoing monthly fees
- Some consumer services may offer the ability to link a debit MasterCard or Visa
- Excellent solution for freelancers, contractors, e-commerce businesses and sellers in online marketplaces
Where to find one
Below, we list the services which offer multi-currency bank account solutions, and provide our pick for best consumer and business product.
| wdt_ID | Service | Accounts | Card | Our score | Review |
|---|---|---|---|---|---|
| 3 | WorldFirst | AUD, CAD, CNY, EUR, GBP, JPY, NZD, USD | No | 4 stars | Read review |
| 4 | OFX | AUD, CAD, EUR, GBP, HKD, USD | No | 4 stars | Read review |
| 5 | TransferWise | AUD, EUR, GBP, USD | Yes | 5 stars | Read review |
| 6 | Currencies Direct | EUR, GBP, JPY, USD | No | 3 stars | Read review |
| 7 | Paysera | AUD, BNG, BYN, CAD, CHF, CNY, CZK, DKK, EUR, GBP, GEL, HKD, HRK, HUF, ILS, INR, JPY, KZT, MXN, NOK, NZD, PLN, RON, RSD, RUB, SEK, SGD, THB, TRY, USD, ZAR | Yes | 3 stars | Read review |
Best for individuals: 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. A debit card can be attached to their borderless account for seamless online purchases.
Best for business: WorldFirst (review). Reliable service to send money online with. 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 large selection of account denominations, which is exactly what a business needs in a truly global economy.
Conclusion
Multi-currency accounts are the perfect solution for individuals and businesses who conduct their commercial affairs across international borders. They allow funds to be received and stored in a range of currency denominations. It is the closest thing you can get to a borderless account solution, which is not only very convenient but can also save you substantial transaction costs in the long run.
