The foreign exchange market is traded 24/7. Companies doing business online simply can’t afford not to have a plan for their exchange rates. E-sellers with an international scope of work have a lot of things to account for: taxes, delivery, returns and so on. However, one of the basic recurrent issues is receiving income from online sales. The process of getting money back can easily result in ridiculously high fees. Figuring out proper money exchange rates can often be a gruesome challenge. There are some practices you need to follow and definitely some you should avoid at all costs. This post will walk you through the main money exchange rates do’s and don’t.
Look for lower fees
This is the cornerstone of the whole exchange process. Marketplaces like Amazon thrive on various fees that take away a significant part of your sales. If you have an account with the local bank, you can transfer the money without any currency conversion fee. BUT, if you don't, the payment will automatically be converted to your local currency. Moreover, if you’re from one of the countries here, you’ll be required to open a relevant bank account of the country you are selling at, in order to withdraw money to your local bank. This is something that a payment company can easily do for you and offer a more favourable solution.
While the factor of convenience is high as these marketplaces deal with the payments and process them for you, they don’t nearly offer the best rates. Money exchange can pose an issue, considering the fluctuating nature of exchange rates. A specialist payment service dealing with money exchange rates can help solidify your profit margins by giving you much lower fees. These services charge a smaller margin and don’t have overheads like banks and other brokers. That way, you get payments in a single account that are easy to track and process and have a favourable exchange rate.
Simplify the process
While money exchange rates may seem like a simple enough process, it gets more complex and confusing the more you get into it. It’s understandable as this is not the focus of e-sellers but rather something that comes along with the ride. By opening up your e-commerce to a wide range of markets, you naturally increase the number of customers and buyers you reach. While this is usually a result of a well-thought business strategy, the newfound situation and the volume of opportunity can sometimes catch many e-sellers off-guard.
One of the best things you can do for your business is hire a company that specializes in payment processing. A third-party payment company gets rid of the complexity and let you focus on other things that matter. For these companies, it’s just a normal, run-of-the-mill operation of moving money from one place to another - simple, effective and ultimately, cost-friendly.
Personalize your experience
The beauty of e-commerce is you can do business in almost any market you want. With that global network comes a multi-directional stream of payments. Considering that banks and retail stores charge every transaction, you want a non-bank provider that offers a complete payment solution that makes the best of it, as well as an additional array of services for a complete e-commerce financial handling.
For instance, you can have all of your revenues coming into one place. From there, you have complete freedom - transfer the money to different platforms, make supplier payments or do anything you need with it. Not to mention that non-bank providers, thanks to their model of operation, charge three to four time less than banks. The math is quite simple on this one.
Now that we’ve covered some useful practices, let’s see what are some of the things an e-commerce business shouldn’t do when opting for currency conversion.
Use a currency exchange-only company
For many, the first option regarding money exchange is using a company that exclusively deals in currency exchange. It’s like when you arrive at an airport in a foreign country. They are among the first things you see at an airport and they are extremely convenient as they provide service momentarily. Nevertheless, they are also a bad option for two reasons:
- High transaction or commission fees
- Low exchange rates
Because they solely deal with currency exchange, they cannot offer a rate which comes close to the real mid-market rate, especially on sizeable amounts. One of the best solutions is hiring a payments specialist company that could mitigate these high costs. What’s more, the service doesn’t stop there as they can provide additional services that will entirely benefit your e-commerce. For instance, you can lock rates in advance and form a forward exchange contract, meaning you can exchange money at a pre-agreed rate on a certain date.
Lock yourself out of new marketplaces
When you sell on Amazon or other online store, you are using their widespread visibility and credibility to present your products and services. What you are also doing is conforming to their rules in terms of currency exchange. The truth is these marketplaces don’t offer favourable rates you’d come to expect, which ultimately can turn your business dead on arrival. This is especially evident when getting into more challenging markets with different currencies. Some of those currencies tend to be more volatile than others like Euro, for an example, which makes for an added stress to your business handling.
Instead, a third-party solution can offer a wide array of currency exchange services tailored for e-commerce like supporting multiple currencies, payment methods and options adapted for each business. That way, you can fully utilize all the aspects of your business for maximum profit.
Convert if you can avoid it
If there is any chance to avoid conversion, make sure you take it. When receiving funds in foreign currencies, you can always use them to buy various solutions for your business and thus save money you’d initially lose on conversion fees. For instance, if you use Skype and other VoIP services for business purposes, you can purchase credits for them. You can use the funds to hire a host of professional services and independent contractors online to help manage different aspects of your ecommerce business.
Be too traditional
If there’s one thing that goes into bank’s favour, it’s the credibility factor. However, the rising number of companies that deal with non-bank providers shows a shift in doing business. It’s easier to enter multiple marketplaces because they are incorporated into one system. The advantage of that system is that you don’t need a bank account for every market as the payment company does that for you. Instead, you receive funds in a single account and avoid lots of hassle and paperwork (opening multiple bank accounts can be difficult and time-consuming), as well as receiving more money than by using a bank each time.
The money exchange rates are constantly changing and the way your funds are managed can make a huge difference in your profit margins. The answer lies in the form of specialized independent payment companies and platforms with innovative model of operations. There are multiple reasons why a specialized payment company is the answer for all your troubles. It takes away the complexity of the process, offers you reasonable exchange rates and fees and creates a personalized solution for all your financial needs. Money exchange shouldn’t be such a hassle and an off-putting experience that it makes maintaining the profitability of your e-commerce a challenge. By having an exchange partner, it isn’t even in the slightest form.
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