One of the most important things for e-commerce sellers to consider is the money transfer system they will use, frequently from a bank account in one country to a bank account in another. Some of the essential criteria to assess the best solution include:
This post will explain about some of the available options so you can make the best decision for your online selling business.
Transferring Money Overseas
Frequently e-commerce merchants will need to send money overseas via international money transfer. There are a number of options, services and service provider, but it can be confusing to sort through all of the information available online.
The basic way is simply to send money from bank to bank through their standard international transfer service. However, there are a number of reasons why this is not the best option in most cases:
- High fees
- Poor exchange rates
- Slow service (around 3 business days is standard)
There has to be a better way, in particular than losing 1-3% extra on the exchange rate spread compared to spot rates, not even counting bank fees.
This is where third-party (non-bank) services come in. You can get a far better deal using dedicated money transfer solutions than the standard service from major banks. Some of these specialist services have storefronts, while others are online only.
Traditional Bank Transfer
If you have an online banking service in your home country, it can be convenient to use bank transfer. You will need to know the name of the receiving account, and the receiving bank’s SWIFT code. (The SWIFT is an international standard for bank identification.) An advantage is that once your home bank account is all set up, identity verification is not an issue with bank transfer. Note: check the exchange rate offered by the bank very carefully! This is where the banks make the bulk of their profit, and you may find yourself paying more than you are comfortable.
PayPal and Similar Services
To those starting out in e-commerce, something like PayPal can seem like a good option for transfers. It’s well know, chances are you might already have an account, and they will send money to a wide variety of countries. Not only that, it’s relatively easy to get verified for a PayPal business account. However, unless you are brand new and dealing with small numbers, PayPal ends up being quite expensive – comparable or higher than bank transfer in many cases. Take a careful look at the fees and exchange rate. While banks usually have a flat fee and an unfavourable exchange rate, PayPal takes a percentage rather than a flat fee, in addition to what is generally an exchange rate similar to banks. PayPal can be a great way to get set up to send and receive money quickly in your e-commerce venture. However, evaluate carefully if you want to keep on using it in the long term. For most merchants, it’s clearly not the best solution in terms of costs.
Other companies offer a similar business model to PayPal, including Payoneer, Skrill and Worldfirst. They are primarily solutions for smaller international purchases and transactions, and offer payment gateways and so on. Like PayPal, they tend to be easy to use across many jurisdictions, but due to their rates are not necessarily the best deal for online merchants who regularly transfer funds.
Specialist Money Transfer Companies
Specialist money transfer companies are more focused on commercial transactions and ensuring low fees, than operating widely-used payment solutions like PayPal. They tend to be more focused on the needs of merchants.
There are an increasing number of them, many operating online only. While there are many reputable ones, if you are unsure about a particular one, check that they are registered in major jurisdictions, such as the USA, EU including UK, and so on, and that they have a physical address accessible on the website. Of course, check for reviews and feedback about them as well. As you do your due diligence keep in mind that the global transaction system these days is safer than ever.
These are the steps you will need to take to conduct a transaction with one of the specialist companies:
- Set up your account at the website of your selected money transfer company.
- Decide on the amount you wish to transfer, and check the fees and current exchange rate.
- Using the site interface, check the fees and exchange rates and enter the details of your transfer transaction
- Approval: especially for the first transaction, you will need to verify your identity. Usually this will involve a scan of an approved photographic ID and there may be other steps for verification as well.
- Make the transfer through your bank, using the details supplied by the transfer service.
- Receive the funds. The money will be deposited in the destination account. While the time this takes varies, it is generally much faster than bank transfer.
Solutions For e-commerce Sellers Based Outside the USA
Merchants based outside the USA often do the bulk of their sales inside the USA, on a platform such as Amazon. While it’s possible to do so without a US bank account, in many cases it’s much easier to have a US bank account. In that case, sellers can avail themselves of the full range of money transfer solutions and make their choice according to what’s the best deal for them, including checking out the specialist services.
Amazon can send funds to bank accounts in a range of countries such as USA, Canada, Australia and EU member nations (the ACH-compliant nations). But for another group of countries, (see the full list of countries here) you will need to set up a US bank account, which is perfectly possible with the help of specialist firms such as MoneyNetint.
Whatever the size of your e-commerce business, you will need to research the best type of service to make transfers both to and from your home bank account. PayPal and bank transfers can serve a need, but for most businesses, dedicated services will provide better speed and/or lower fees without compromising on security and peace of mind.
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