Banks across Europe earn hundreds of millions of euro a year from higher charges to small corporate customers for foreign exchange services according to a recent paper from the European Central Bank. Smaller corporate clients tend to pay higher rates for protection against swings in exchange rates. In some cases those rates can be 25 times higher than for bigger, more sophisticated customers, the researchers found
The findings of the study revealed that banks collect an extra €638m a year on average as a result of discriminatory pricing in euro/dollar contracts. Lack of transparency on FX is bad for Irish businesses. Therefore, it is imperative that small businesses have a better approach to managing their currency risk and protecting themselves from market volatility.
So what are the issues that SMEs need to be aware of when making foreign exchange payments? Billy Farrell of Fexco Corporate Payments explained;
“One major issue facing SMEs is bank levy fees. Smaller organisations are offered unfavourable exchange rates by their banks compared to their larger corporate counterparts. Hidden costs are often incorporated into the exchange rate leaving SMEs totally in the dark about how much their foreign currency payments really cost.”
Commercial margins are impacted when businesses big and small are exposed to currency risk as a result of overseas currency transactions. Over the last three and half years Brexit has and is still causing sharp devaluations to the finances of many businesses. Yet many small businesses are suffering losses due the failure of banks to provide competitive FX rates in the aftermath of the pound’s decline.
Commenting further Billy Farrell added;
“SMEs should be treated equally to multinationals when it comes to the provision of FX services for cross border payments. This is vital if smaller businesses are to thrive internationally. At Fexco, we don’t distinguish between large corporates and smaller businesses when it comes to the level of service that we provide for them. In fact, many of our newly on-boarded clients from the SME sector are amazed at the savings they are making on lower fees and bank-beating F X rates. Knowing there is a dedicated dealer at the end of the phone also provides greater transparency and is an added bonus”.
As SMEs are becoming increasingly global, sourcing materials from more exotic locations is becoming the norm. The value and service provided by fintech companies like Fexco who are investing in innovative technology to provide faster and cheaper payments is invaluable.
About Fexco’s International Payments Service
If you are looking to conduct business in the global marketplace Fexco will help you to avoid the high fees banks charge for currency exchange and cross-border transfers.
- Over 130 currencies including exotics
- Bank-beating FX rates and low fees.
- Faster, safer payments to overseas suppliers.
- Secure online payments platform that tracks your payments
- Dedicated FX dealers and customer support.