FX costing your business too much money? Then stop using banks

We take a look at how companies can save time and cost with alternative financial services providers.

It has been a particularly turbulent time for UK businesses over recent years, with the overlapping challenges of the COVID-19 pandemic, Brexit, and supply chain crises. Research from the Bank of England involving two million UK businesses found a 30 percentage point reduction in turnover growth for the average SME last year, with 168,200 small UK businesses predicted to close within the year due to adverse effects of the pandemic.

There has never been a more critical moment for businesses to explore new avenues and investigate alternative opportunities to save money and time. With UK inflation escalating to a near-30-year high of 5.4 per cent and could rise to over 7 per cent later this year.

This record-breaking inflation rise began in 2021 partly due to the pandemic causing world economies to lock down then reopen erratically. Consequently, business owners have witnessed price rises across the board, from raw materials to transportation to labour costs.

One area where companies can save time and money is with international transfers and foreign exchange fees. Many companies still use traditional banking providers who operate largely on legacy infrastructure. These increasingly dated technological systems can cause a host of fees and delays that do not apply when using newer, more agile technology.

Most banks bake fees into each stage of the customer journey when making a foreign transaction. Typically, most banks generate revenue by introducing charges to businesses for each step of the operational process, including maintaining a local account, an overseas account, sending money, converting money into local currency, receiving money, and so on.

Research has found small businesses in the UK pay approximately £4 billion to the major banks each year just to purchase international goods and services. These banks not only charge you but offer unfavourable exchange rates. All of this makes it challenging for small businesses to understand precisely how much they are being charged.

Take the example of an electronics merchant based in the UK importing from China and selling directly through their own website into Poland and Germany. The merchant can be charged to hold bank accounts in the UK for Polish Zloty and Euros.

The merchant could pay a fee each time a payment is made into the Polish and German bank accounts. If the business makes an inventory purchase from China, they could be charged astronomical fees to convert funds into US dollars. This does not even include the significant premiums charged by the incumbents on the FX margin which is applied.

Specialist financial services providers leverage nimble fintech features to improve efficiencies and drive down costs, enabling frictionless transactions with fewer delays when it comes to cross-border payments.

GC Partners is one such example, and last year alone made 300,000 payments on behalf of their clients.

Unlike banks, they offer a high-touch service assisting clients to protect themselves from risk in highly volatile markets. A personal relationship manager at GC Partners will offer clients an in-depth review of their company’s requirements and strategy. This includes an assessment of the risks that businesses face to protect their margins. The goal is to shield a business from currency volatility and ensure stable profit margins and sustainable growth.

It is never a bad time to switch to specialist providers that help a business reduce costs. But recently, it seems like there has never been a more opportune moment for companies to consider how modern alternative offerings can help them not just survive but thrive.