Businesses on the cusp of international expansion are quickly met with an array of challenges. These challenges impact every area of the business, from the way local languages and cultural differences impact sales and marketing, to logistical issues that impede product delivery.
Financial institutional challenges can be especially daunting, and difficult to navigate. As an expanding business, you need the capability to accept credit card and bank transfer payments from customers, as well as pay salaries and expenses. Your payment service provider must be capable of mediating cross border payments and facilitating currency exchanges.
Traditionally, businesses in this situation were limited to a single option – opening foreign bank accounts in every region where they operated. However, today’s rapidly evolving online financial ecosystem has generated a new option for globally expanding businesses. Virtual bank accounts associated to e-wallets provide another financial channel for businesses crossing international borders.
Both challenger banks and e-wallets offer the tools you will need to operate internationally. You can easily pay bills and salaries, exchange currencies, and transfer funds. However, there are significant differences between the two options.
Opening Your Account
Opening a business bank account in one country while physically being in another is nearly impossible. If you’ve ever researched how to open a bank account in a foreign country, you know that banks have a stringent KYC (Know Your Customer) process. They typically require you to be on premises to open the account, as well as have a local legal presence to get started. You will need to show multiple pieces of identification and make an initial deposit to get your account started.
The larger the business, the more complex it can be to satisfy KYC requirements. In a process that can take months, business owners need to submit personal details about their lives, their clients, and the source of their finances. Even after gathering all the required information, the bank still has the ability to decline opening your account, or require multiple documents. Worst of all for business owners, this process must be repeated with every new market they want to operate in.
E-wallet companies, specifically electronic money institutions, on the other hand, typically have global-minded KYC processes in place. Once a business satisfies its KYC requirements, they are capable of carrying out all their financial activities in every market where the e-wallet has presence or local partnerships. An e-wallet essentially connects multiple payment service providers and different accounts to a single interface, becoming a gateway to global financial reach.
Managing Your Account
Global businesses typically require multi-currency accounts, and wireless transfers of funds from one location to the next. This plays into the banks’ hands, who charge high fees for precisely these types of financial activities, and often require several business days to complete international money transfers. Frequently, they require multiple documents supporting each transaction.
E-Wallets, on the other hand, specialise in liquidity management capabilities. That means they can easily move funds from one jurisdiction to the next, allowing for local disbursement of funds. These transactions come at a fraction of the cost, and in some cases can be completed in real time.
Finding the Right E-wallet Solution
With low fees and seamless operations, it’s clear why so many businesses on the verge of international expansion are turning to virtual banking and e-wallet solutions. Cash flow is the lifeblood of expanding businesses and maintaining local currency accounts accounts allows them to inject cash into projects as needed from anywhere within the company.
As exciting as e-wallets are, it is important to realise that not all e-wallets/EMI (Electronic money institutions) are created equally. Here are four things to look for when selecting a virtual entity to handle your money.
When funds are transferred through online channels, you want to make sure that your EMI is secure from online threats and hackers. Browse through your EMI’s website for their security policy or ask about it through their online chat or contact form.
Find out what type of network security is in place to protect against Distributed Denial of Service (DDOS) attacks and learn how their network traffic is encrypted. Strong access controls with role-based accounts prevent unauthorised personnel from accessing and transferring your funds. You’ll also want a minimum of two-step authentication so hackers can’t guess your password.
Finally, find out where your e-wallet/EMI stores your money to keep it safe. Tier one European credit institutions are preferred.
Before you deposit a single pound, euro, or dollar into your local currency account with your e-wallet/EMI, you need to trust that you can access your funds when and where you want them, and that your money will be safe.
EMIs that are monitored by reliable government regulators are required to adhere to that government’s standards. Look for an EMI that operates under the watch of a country whose banking system you trust. They will offer you the highest level of reliability and trustworthiness.
If you’re planning on operating in specific countries, make sure that your EMI operates there as well. You don’t want to find yourself doing business in a territory or region and discover that your financial institution is unfamiliar with the regulations and requirements in that area.
While e-wallet/EMI fees are significantly lower than that of traditional banking institutions, they still range. Before signing up for a service, be sure that the price is reasonable, not ridiculously low and yet fair and make sure to get a detailed explanation about the different fees for various activities, so you have a solid understanding of the costs involved in working with your payment services provider.
Electronic wallet solutions can provide you with the financial flexibility you need to develop into a global player. With a single multi-currency wallet, you can pay baht to your supplier in Thailand, transfer euros to your designer in Paris, and send Canadian dollars to your salesman in Toronto.
Find the solution that helps you financially think global, act local