Corporate FX vs Online Business Payment Service: Which Does Your Business Needs?

Corporate FX vs Online Business Payment Service

More businesses than ever before are taking Corporate FX seriously. These tough economic times are hitting business foreign exchange hard as business money transfer services become ever more expensive. Thankfully though there are plenty of cheap foreign exchange services for businesses out there. If you are a business owner looking to cut costs on making business foreign exchange payments abroad or manage FX risk in a more sensible way, keep on reading.

The Global Era

We live in the era of globalization. Yes, there are still a few isolationist outliers and yes, world politics has seen an ugly resurgence of nationalism in recent years, but nevertheless, this is the global epoch. Trading blocks like the European Union and the South Asian Free Trade Area (SAFTA) are promoting seamless trade and more businesses than ever before are servicing international clients.

Trading globally presents many exciting opportunities for a business whether it’s a lucrative new market hungry for their wares, or simply the prospect of internationally outsourcing some of its operations to cut costs.

Why Does a Business Need Corporate FX Services?

But, as many business owners will tell you, dealing with suppliers or customers abroad comes with complications and hidden costs. Perhaps the most problematic of these is the costs associated with changing foreign currencies and sending or receiving money from abroad.

Therefore, more and more businesses that routinely deal with overseas suppliers or customers, are seeking out dedicated corporate FX services to help them reduce costs on both inbound and outbound payments denominated in foreign exchange which normally carry a significant amount of fees.

What is Corporate Foreign Exchange?

Put quite simply, Corporate Foreign Exchange (CFX) is a foreign exchange service set up to cater especially and exclusively to business. A corporate FX provider can help a business to change currencies, buy reserves of a foreign currency, or can help them send or receive money internationally.

Whereas a business could simply rely on its bank to handle all of these functions, the reality is that this will prove unnecessarily expensive and is not the cost-effective way to do business. A corporate FX service provider can offer much better exchange rates and far cheaper international transaction fees than the banks.

The corporate FX market is a buoyant one and there are a lot of companies offering various CFX services. As per MoneyTransferComparison’s corporate FX guide, a couple of the biggest names in the space though areMoneycorp and Currencies Direct. Moneycorp is a UK-based, long-established, and award-winning foreign exchange specialist. Currencies Direct is based in the UK,  licensed in the EU and almost everywhere else in the world, and helped move an estimated  £7.5 billion across the globe annually.

Both MoneyCorp and Currencies Direct are able to offer their corporate clients a bespoke, tailored service to cater to their particular needs. This could mean that they are able to offer “better than bank” exchange rates on certain currency exchanges or it may simply mean that they can advise on the best time to make a translation or exchange so as to best to capitalize on the fluctuations in the forex markets.

Currency Hedging

Both companies are also good options for a business looking to “hedge” currencies. Corporate currency hedging is when a business “hedges its bets” and takes speculative, proactive steps to try and insulate itself from changes in the forex markets.

For example, if a US-based business knows that it will need a large volume of Euros in the next trading year, it could buy them in advance in order to “lock in” what it deems to be a favorable USD To EUR exchange rate. By doing this the company is “hedging” against a potential future rise in the value of the Euro. Of course, hedging can be risky as forex markets can (and do) either go up or down – if the Euro dropped against the dollar, then the company would effectively have overpaid for the currency.

In terms of hedging, Corporate FX service providers can provide advice on what is likely to happen in the currency markets and can recommend optimum times to buy or sell a currency. They can also offer multi-currency accounts which a business can use to store a foreign currency rather than immediately changing it to its native currency. 

Making Business Payments Abroad and Cheap Foreign Exchange Service for Businesses

Some businesses do not require the full Corporate FX service. In fact, many small to medium enterprises are transacting internationally on an ad-hoc, irregular basis in relatively small amounts. Businesses like these are not as worried about the medium to long-term implications of the forex market and can simply change currency as and when they need to.

However, even these businesses do need to be very mindful of the costs of sending or receiving international payments. Relying on the banks to handle an international payment can cost between 3% – 5% of the transaction’s value, which is a margin no SME can afford. Thankfully though, online international payment providers like Wise and AirWallex are now offering fast and cheap international payments.

Both companies grew out of the “fin-tech” space and initially proved popular with freelancers and online traders although both have now grown in stature. Whilst payment providers are excellent at what they do and have much better value than the banks, they cannot offer the personal touch or the advisory element that a corporate FX provider can.

Business Money Transfer Service Hybrids

Perhaps inevitably, a trend for hybrid companies is now emerging. OFX for example has an excellent and cost-effective online payment system which is perfect for anybody who simply wants to quickly and cheaply [ly send or receive money internationally. Both its technical interface and fees rival those of Wise and AirWallex.

However, OFX is also able to offer corporate clients a dedicated account manager akin to the Corporate FX and currency brokers. This “best of both” model is proving popular with SMEs and corporations alike.

Multi-currency Accounts

One thing that all of the companies we have named in this post can offer, is multi-currency accounts.

Multi current accounts add an immense value for any business that regularly deals in a particular currency. For example, a US-based company that pays suppliers in Europe could keep an account balance in Euros which it can use to pay the European suppliers as and when it needs to. This protects them from fluctuations in the forex markets. Additionally, the business would also be free to change the Euros into Dollars at any time it wished, allowing them to choose a moment when the USD to EUR rate is favorable.

Final Thoughts

In this post we have seen the value that a Corporate FX service can provide.

Corporate foreign exchange providers can offer any business personal advice and bespoke account management. For any business that does not require this, then Wise or AirWalles are excellent business money transfer services that can help make low-cost business payments abroad.

Whether you are looking for cheap foreign exchange services for businesses, there are business foreign exchange providers out there who can help your business save costs.

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