Get smart and avoid the money pit-falls

The upward trend across the SME landscape towards global expansion is set to trigger increased growth of the already thriving business transfer revenue market. Looking at the next generation technologies that will offer better security for businesses operating globally and to avoid the money pit falls. 

With the move towards globalisation, spurred on by the prolific nature of an IOT network that is tipped to consist of 50 billion devices by 2020, the international business playground – once reserved for established players only – is opening up to SMEs who are demonstrating an increasing appetite for global expansion and outsourcing.

SME international trade in the UK is now worth some $935 billion, with businesses transferring an average of around £35,000 every month internationally. With an upward trend towards global expansion, the current SME business transfer revenue market, valued at £23billion, is set to soar. For businesses operating in the money transfer space, such forecasts present exciting opportunities for both young and old players alike to keep evolving and honing their offering to fit the increasing need.

The industry’s evolving marketplace could spell good news for SMEs, who currently have to make their way through complex, costly and time-consuming routes to achieve the best deal.

While some important moves have already been made to improve the money transfer journey for businesses, there is still more to be done to help businesses capitalise on the more cost-effective service offerings that new money transfer players are bringing to the table.

To roll out the most effective experience that will bring more transparency and reduce the squeeze on SMEs’ time and resources, it’s important to get under the skin of the user and appreciate the pinch points from the SME’s point of view.

Greater choice of money transfer options is clearly great for driving down costs and pushing the boundaries of better service delivery.  However, with increased choice, you also have greater complexity in the market, meaning that there is need to spend more time on research, prior to selecting the best option.

In the last five years, the number of companies transferring money abroad has grown from 35 to 112, and that’s just in the online space.

In other industries, we’ve seen the challenge of search within a complex marketplace tackled with aggregator comparison platforms.  The success of Skyscanner and MoneySupermarket proves that this model clearly works for users, providing a time-saving method of filtering a market’s offering, based on search criteria.

The changes made thus far to improve the global transfer money experience have been important, but they have not necessarily been transformational – many of the same things are being done, just differently.

However, next generation technologies are on the horizon that will bring together changes in the finance landscape, and offer better security for businesses that are operating globally.

The problem with money transfers

Whether a business is eyeing wider global expansion or not, the experience of funding overseas operations or paying international suppliers often comes at great cost.

Understandably, many will turn to trusted banks – who have earned credibility over long periods of time and offer a convenient route – to make their transfers. According to a YouGov study, more than 25 per cent of businesses believed they were getting a good exchange rate, while almost 20 per cent admitted to having no idea how they were being charged or what the true cost of their transfer was. Moreover, as cited in a report from payments consultancy Accourt, a majority are blind to the fact that banks are charging UK small businesses in the region of £4 billion in hidden fees per year, profiting from the poor exchange rates offered,

The convenience factor has no doubt proved to be the lesser of two evils for many businesses, who are deterred by the complex and time-consuming journey of finding the best deal.

Since the emergence of Transferwise and TransferGo – who have alerted users to the excessive fees charged by banks – there’s been a proliferation of new-to-market ‘neobanks’ and startups offering cash services for foreign exchange. In trying to create more transparency, this proliferation has actually thrown more confusion at businesses trying to find best deals.

For the person responsible for organising international money transfers in a business setting – whether that’s for payroll, paying suppliers or even arranging travel – the road to a best deal is more often than not paved with complexities, from fast-fluctuating rates and volatile markets to an overload of choice and time/budget constraints. Hence, the default decision is to work with existing partnerships to alleviate as much pressure as possible – regardless of the costs.

But with the emergence of game-changing technologies and disruptors – who, with customer-centric vision are developing solutions to remove the friction from the experience – the possibility of SMEs benefiting from a best-of-both-worlds scenario is becoming a reality.

Change is around the corner

With the introduction of blockchain technology – and in spite of it still being in early stages of development – the financial services ecosystem is standing on the threshold of a whole new era. Real transformation is tangibly close, especially in the currency exchange and money transfer space.

At its core, blockchain is all about getting data from A to B as quickly and safely as possible, and so for currency exchange, it’s the next logical step towards delivering a transparent, secure and fast service. While we have only skimmed the surface of blockchain technology’s potential, there’s no doubt its impact on the financial services ecosystem will be game-changing.

As the world becomes increasingly globalised, with more people travelling and living abroad, industries are getting more competitive in answering the respective needs of travellers. In the mobile network industry, for example, we are starting to see far greater competition regarding usage of data overseas. Only 4 years ago, using data overseas was a cardinal sin met with extortionate fees. There were reports of people forgetting to turn off their mobile data when abroad, only to be met with phone bills in the thousands. We now see a number of providers offering free, unlimited data usage when abroad.

While market leaders in the mobile industry were quick to adapt to the increased demand for overseas usage, financial institutions were not so accommodating. So rather than market leaders offering more competitive solutions, new companies began to spring up, offering solutions exclusively for overseas spending, money transfers and currency exchange.

Many of these startups are quickly snatching up market share from the big banks and are on their way to becoming household names. The trend in the near future will likely be focused on competition between smaller companies, rather than bigger financial institutions. 

Open your eyes to the blind spots

Historically, global expansion was a vision reserved only for fully-fledged, large scale companies. In the here and now, the emergence of fintech disruptors and their next generation technologies have enabled SMEs to share in the same near-future aspiration for international growth.

Whether you’re already actively making international transfers or are looking to take your first steps, here’s a few top things to consider that will ensure everyone benefits – allowing you to put cash aside and reinvest in your own business:

• The cost of international money transfers, especially through your traditional high street banks, can be potentially devastating. Take time to shop around and compare rates, including those from online money exchange services with lowest fees
• Seek out real-time currency exchange rates (without the added commission) – a day can really make a difference to your bottom line
• Save yourself time and energy that you can put into the business elsewhere by setting up alerts of when rates are at their best for you
• Explore alternative payment methods as you could save you a significant amount if your business requires you to regularly send international payments or pay overseas workers