This is a contributed article from Payoneer.
In January of 2015, nearly 3 years ago now, it was estimated that there were over 2 million third-party sellers on Amazon. No doubt that number has increased significantly since then. The world gets smaller every year, as cross-border selling, shipping and customer service become increasingly simpler.
Yet many sellers and SMBs are still troubled with concerns about the costs of doing business internationally; sending or receiving money across borders is perceived as slow, costly, insecure, and possibly not worth the hassle.
From wire transfers to exchange rates, sellers that grasp the ins and outs of international payments stand to reap the most rewards in the modern marketplace.
So, what can you do to better navigate and understand the world of international payments? Master these four points and you’ll be well on your way to doing international business smarter.
1. There is only one currency exchange rate
If you’ve ever converted cash from one currency to another, you might have gotten the notion that there are several exchange rates, and that you need to “hunt” for a provider or bank that gives you the best rate.
In reality, there is only one true exchange rate between any two currencies: The mid-market rate (sometimes called the inter-bank rate). Foreign currencies are bought and sold in international currency markets on a daily basis; the mid-market exchange rate is the meeting point between the buying and selling prices of two currencies. It can shift often, but at any given moment, there is only one mid-market rate.
Currency conversion fees or commissions can differ between financial institutions. Oftentimes, banks and financial institutions will tack their exchange fees on to the exchange rate, and tell you that “their” exchange rate is X. It’s a clever marketing scheme, as it then allows them to claim that there aren’t any commissions or fees on top of the exchange rate. In reality, they’re just taking the fee on the way.
You can look up the mid-market exchange rate of currencies on independent financial websites like XE or Yahoo Finance. This can help you to assess whether your payments provider is charging a fair fee.
2. Not everyone likes to pay (or get paid) the same way
When you’re paying for a service or product, do you prefer to use your credit card? Perhaps you prefer a bank transfer or cash? These preferences change from country to country and culture to culture. They are often tied to how advanced the local economic scene is and whether or not there is trust in the banking system. When receiving payments from marketplaces like Amazon or paying out your international supplier, flexibility is the name of the game. Many digital payment providers can offer you services to simplify this process, such as a virtual bank receiving
When receiving payments from marketplaces like Amazon or paying out your international supplier, flexibility is the name of the game. Many digital payment providers can offer you services to simplify this process, such as a virtual bank receiving account in another country. If your marketplaces require a local bank account, you’ll be covered. Another helpful tool is the ability to pay your obligations to suppliers and vendors without having to deal with tedious wire transfers. Having many options on hand to help you conduct global business smoothly will not only ensure a steady cash-flow, but it will also make you someone that clients and companies enjoy working with.
3. International wire transfers are not the only (or best) option available
These preferences change from country to country and culture to culture. They are often tied to how advanced the local economic scene is and whether or not there is trust in the banking system. When receiving payments from marketplaces like Amazon or paying out your international supplier, flexibility is the name of the game. Many digital payment providers can offer you services to simplify this process, such as a virtual bank receiving account in another country. If your marketplaces require a local bank account, you’ll be covered. Another helpful tool is the ability to pay your obligations to suppliers and vendors without having to deal with tedious wire transfers. Having many options on hand to help you conduct global business smoothly will not only ensure a steady cash-flow, but it will also make you someone that clients and companies enjoy working with.
In the movies, when someone wants to wire funds to an account on the other side of the world (particularly if it’s a lot of money), a bank teller makes a call, plugs some numbers into the computer, and five minutes later the money magically appears in the other bank account across the world.
Like many other things in the movies, this is wildly fanciful. In reality, moving money from one account to another across borders takes two business days in the best cases, and up to 15 in the worst. Bank transfers often involve several other intermittent banks along the way, and can cost an average of $46 per transfer.
With suppliers located in one place and you in another, sending and receiving payments in a timely (and cheap) manner can make or break your eSelling business. Consider working with a digital payments provider that can guarantee you a 2-3 business day transfer window and consistent, low transfer fees.
4. Settling VAT obligations doesn’t need to be a hassle
If you’re selling on Amazon UK or Amazon DE, you may owe VAT to the respective governments. This fact may be putting you off from wanting to sell on those marketplaces in the first place.
VAT is complicated, but working with the right service can help simplify this issue from end to end. Some payment services will provide you with info, guidance and even a direct channel to settle your VAT obligations to the relevant European government entities. VAT shouldn’t stop you from growing your business or expanding into new markets in Europe.
As a seller, Payoneer has you covered. You can easily receive payments from international marketplaces, send payments to your suppliers and service providers, settle VAT obligations and more. Sign up today for a free account, and become the expert in managing international payments.
