Banking with a traditional bank for overseas business will increase cost and currency risk.
Using a multi-currency account provider allows businesses to utilize local accounts, and IBAN accounts and ultimately reduce cost.
It is possible to send, spend, receive, and earn interest on multiple currencies. Then, for the day-to-day, you can make batch payments, raise payment links and invoices, and segment expense spending as needed.
Features of multi-currency accounts
Local or IBAN accounts
Using a multi-currency account will give business access to local accounts or IBAN account numbers across multiple locations.
Local accounts are best for regular transactions and cross border spending.
IBAN accounts only will allow you to transfer funds at a lower cost, but spending can be limited if a company doesn't offer a separate card service.
International payments
Multi-currency business accounts are great for cross border payments, both in and out.
By offering local accounts in Europe, payments from the US to Europe can be made via the local account.
For receiving cross border payments this is the same. For companies in the UK, receiving a payment from Europe can be made into a local EUR account and then transferred to GBP.
Again, this reduces the cost for the sender but also for a business that might otherwise pay high fees to receive international payments.
Expense management
Multi-currency accounts will come with multi-currency cards as well. These can be virtual or physical cards. They can also be prepaid, or be set to make payments from a specific local account.
As for expense management, it is relatively simple, and companies will offer allocation and limits on cards at a business, team, need, or individual level.
Integrations
Great businesses function on efficiency, and multi-currency accounts will come with integrations with different accounting services.
The most common of these you will find is Xero.
This being said, Sage and Microsoft Dynamics are also widely supported.
For any account we recommend, we will outline the integration associated with it.
Shared balances
As with cards, shared balances are also available at different levels for multi-currency accounts.
This means, a marketing team can manage their own budget and track all spend in one part of the account, and payroll can be run from another.
The central finance and accounting teams can have access to all areas, with a summary of the accounts and teams, or heads of teams, can access only what they need.
Batch payments
Multi-currency accounts tend to offer batch payments. Some such as Sokin up to 5,000 recipients at a time.
The benefit is less work to make payments, and then greater savings on the exchange rates.
This is because exchange rates are agreed at the full amount of the batch, not the individual transfer. For higher amounts, you will usually see a better rate.
Companies will also offer guaranteed rates as well. This is where you can agree the amount you will pay, and then make the payment within a set timeframe.
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Every business has different needs, but there are some obvious areas that make multi-currency accounts a great option for international businesses.
Saving on regular transfers
The obvious benefit is lower conversion fees, and ultimately an improvement in risk management strategy.
Having accounts under one-roof for multiple countries or currencies means a separate EUR, GBP and USD balance sheet can be managed. So, incoming and outgoing payments may never need to be converted.
Then, on receiving payments, there are no receiving fees like with banks and no conversion fees either.
For example, if a customer is paying you in EUR, you can take that payment into a EUR account. Then, at a much lower cost than with a bank, transfer it to the USD account or use it for any EUR spending further down the line.
Streamline expense and cash management
Multi-currency accounts offer virtual cards that can often be allocated in seconds. Lists of transactions are able to be centralised by the card (or batch of cards), meaning managing international spending becomes easier.
This often means, employees do not need to submit expense reports, as receipts can also be uploaded.
There is also the removal of the need to pay out for expenses as well. As pre-approved cards and spending can all be controlled centrally.
Improve currency risk management
Having multiple currencies to pay from reduces currency risk. Having one account with all of them is a great way to do this.
As many multi-currency accounts are born from other cross-border payment solutions, you will often find forward contracts and limit orders are available.
Eligibility when getting an account falls in a couple of areas.
The business will need to be registered in a supported country.
The business may need to show accounts and trading proof for a fixed period of time.
In some cases, the business may need a named owner, as opposed to a holding company.
Some multi-currency account providers restrict the industries worked with. Common restrictions are on gambling, adult industries and cryptocurrency.
Not all multi-currency accounts are equal.
Some have fees to unlock other features, while others are fee free but make their money through exchanges.
What you can access based on fee free accounts and annual fees can be compared.
Accounts like Wise Business or Airwallex, with no monthly fees, are not hugely different from companies like Equals Money that charge a monthly fee.
When getting a multi-currency account, the important thing is to get it right for a business, so always compare options.
ATMs and card spending can increase prices.
Starting with the latter, card spending is often affordable (and a perk) if you plan to use a local account to which the card has been assigned. For example, spending GBP from a GBP local account. However, the costs can increase if you spend from a GBP account into USD.
This cost is cheaper than using a traditional bank, but you will pay a conversion cost at the point of using the card. These can be as high as 2%.
For ATM fees, and limits, be aware that even checking a balance at an ATM can cost upwards of $5 in some cases. A multi-currency account is not a traditional bank, so withdrawing cash is more akin to a cash advance. Charges for this can be around 3%.
If withdrawals are important, it is best to consider how to manage these.
The difference between IBAN accounts and local accounts is important to note.
Some companies will give access to IBANs in say 40 countries, others will give access to local accounts.
For local accounts you will have specific account details within that location. This means you can receive, pay, use cards etc in the local account.
For IBAN accounts, the benefit is very much about sending and receiving money at a lower rate. They are useful, and can save a huge amount of money on transactions.
Neither account type is ‘better’ than the other. We always recommend comparing and ensuring the offering fits the need of a business.
The right multi-currency platform is different for every business. We always recommend comparing to get a clear picture of what is on offer, vs what it is your business needs.
Use cases
Multi-currency accounts are used by thousands of businesses across the world. Here are some examples of where they have been used.
Using a multi-currency option will reduce currency conversion fees and has other perks like physical or virual cards that can aid in other areas of day-to-day spending.
This is because currency conversion fees with banks will not be paid, and accounts can be synced to central accounting and inventories to get a clear view on the value different marketplaces are providing.
Working with providers that can aid in building a currency strategy and planning ahead for large payments with tools like forward contracts, will make a huge difference to the bottom line.
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