This guest article was written by Nikolai Kuznetsov from NikolaiKnows.com.
In today’s globalized economy cross-border money transfers play a major role in international business. Any corporation or SME operating internationally engage in foreign exchange transactions.
Hence, having the right partner to conduct your foreign currency transactions is key for any globally operating business.
Price isn’t everything
When it comes to foreign currency conversions and international money transfers price plays an important role, as bad foreign exchange rates will have a negative impact on your international cash flow, once it has been converted back to your domestic currency.
However, when it comes to making regular large international money transfers, price isn’t everything.
Security and safety are the other key aspects of international money transfers. Many businesses put a lot of emphasis on these two aspects and therefore prefer to work with large, reputable foreign exchange partners.
While price is still an important aspect of any currency transaction, the peace of mind you receive from knowing your funds are being dealt with in a safe and secure manner is more important for many businesses today. There are even comparison sites focusing on these aspects rather than pricing.
International money transfer options
International money transfers can be conducted either through banks or commercial foreign exchange companies. Both of these market players have different characteristics to be mindful of.
Many businesses choose the simple option of using their main banking partner to conduct all their foreign currency transactions. This may be the most convenient option, but in most cases definitely not the most optimal one.
Banks tend to charge the highest fees for international money transfers and are therefore not the best option for converting foreign currency cash flows back into your domestic currency.
While banks actually have the best access to good currency rates, they tend to charge high fees for international money transfers to compensate for their high operating overheads, such as staff and systems.
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Alternatively, businesses can choose commercial foreign exchange companies to conduct their international money transfers.
Commercial FX companies offer currency conversion, international money transfers and currency hedging tools to SMEs and individuals.
They have access to near interbank market currency exchange rates, so they can offer their clients fair exchange rates. But also, commercial FX companies tend to charge substantially lower fees to conduct cross-border money transfers.
This makes commercial FX companies a popular solution amongst SMEs and individuals.
When looking at this comparison, it is important to highlight that the optimal solution for your business’ international money transfers depends essentially on your specific business needs.
Choosing the right foreign exchange partner
The key to choosing the right foreign exchange partner is finding one that provides you with the particular services that your business requires.
If you have a specific currency risk hedging strategy that you follow, you will need a foreign exchange partner that offers the type of currency derivatives you need and for the currency pairs that you require them for.
Alternatively, if you transfer very large amounts, you want to opt for a foreign exchange partner that charges you a flat fee, as opposed to a percentage, on each amount transferred.
If, on the other hand, you value safety and security the most, then choosing a very reputable foreign exchange solutions provider may be the right option for you and your business.