hey said the Internet would give SMEs a window on the world, enabling them to expand their horizons and find customers in every corner of the planet. Well, they were half right.
The web does provide a view of the world, but only in the same way a prison cell does. Small businesses can see the green fields of opportunity stretching into the distance, but they can’t reach them. But it’s not iron bars that form this cage, but the high cost of transferring money overseas, which leaves SMEs unable to break out from their home market and get out into the world.
Although SMEs make up around 90% of all businesses worldwide, they are woefully under-served by the world’s financial services providers. Banks, payment providers and electronic money institutions (EMIs) will happily create any number of bespoke foreign payment services for big businesses, or provide them highly advantageous rates of exchange. But when SMEs are left out in the cold, forced to make do with expensive consumer-grade transfer services like SWIFT when they wish to send or receive payments from overseas.
That means they’re missing out on business opportunities estimated at $100 billion every year.
One SME that managed to escape the prison of high fees is Cashback, which saves people money on their online purchases through special deals, offers and coupons. Cashback has grown rapidly since its foundation in 2015, but when the time came to expand internationally, it came up against the brick wall of international payments.
“We targeted Brazil as our first foreign market, but there was no Israeli with an existing payment channel to the country,” explains the company’s co-founder Tomer Gooterman. “To provide rebates to Brazil-based customers and merchants, we therefore had to make do with a well-known consumer-grade money transfer service.”
“This just didn’t make any sense from a financial point of view, not least because these payments services aren’t geared towards businesses with a high volume of transactions. We ended up paying high levels of commission that cut deeply into our profit margins. In the end, it barely made financial sense to do business in Brazil at all.”
If Cashback had been a large enterprise with millions or billions of dollars in revenue, it would not have found it difficult to find a partner like a bank or EMI to create a dedicated payment channel to Brazil. But because it was a new and growing company, such help simply wasn’t available. So much for the fabled “level playing field” and the limitless sales potential of the Internet.
There are millions of SMEs around the world that find themselves in exactly the same position. But finally, help is available. A new generation of payments companies is harnessing new technologies including blockchain, while also forging partnerships with banks, payments networks and regulators in countries around the world to create new payment channels upon which any business, whatever their size, can piggyback.
This new breed of cross-border payments services owe as much to relationships as they do technology. At Moneynet, for example, we’ve just announced a new partnership with Banco Rendimento that slashes the cost of doing business in Brazil. And now that we have those relationships and integrations in place, any business can use it and start tapping into the huge potential of this emerging market.
For Cashback’s Brazilian operations, for example, we’ve been able to cut the cost of sending payments by over 50 per cent. But the benefits don’t end there. “Under the old system, we couldn’t pass the whole [foreign transaction] commission to our customers because our whole business is about saving them money,” says Gooterman.
“That meant we had to swallow some of that cost ourselves. Now, we have increased margins which means we can pass this onto our customers through providing them with better deals, while giving us more spare cash to put towards customer acquisition. It’s completely transformed our relationship with Brazil and, we hope, will enable us to invest in expanding our services to many more markets to come.”
Cashback is just one of the many thousands of businesses that have broken the shackles and are now free to start trading with the world on equal terms with even the largest enterprises. If you want to plan your escape from high fees, Moneynet will help you find freedom and open up a whole world of opportunity. Get in touch to find out how.