How new services bring global banking closer to SMBs

By Sandeep Todi, Co-Founder and Chief Business Officer at Truly Financial

Small to medium-sized businesses (SMBs) increasingly buy services from other companies, hire freelancers, and accept clients’ payments in new markets internationally. While these smaller companies need banks that can keep up to run these processes smoothly, it’s still challenging to get easy access to international banking.

More often than not, SMBs resort to paying via wire transfer or third-party payment services. Those can be expensive, and wires usually require a branch visit – adding to their already long to-do list. Overseas teams also need to be able to quickly pay for things in a way that uncomplicates day-to-day payments for the finance team at HQ

Aligning these needs with a suite of services through a big bank is easy if you’re a large company. But if you are a small business and struggle with your financial institution, you need to consider emerging fintech services that put big-bank convenience within your reach, minus the high cost.

Down to the wire

SMBs need everyday access to local and international banking. Fundamentally, this means they should be able to receive and send payments in USD and the currency of their supplier/contractor.

Why aren’t banks already offering this? Here’s the real problem: If you use a large bank to send an international payment, you have to go in-person to a branch to send the wire transfer. Small business owners wear many hats—going to the bank to send a wire is not exactly value for time.

Moreover, wire transfers are expensive and can cost between $20-$80. If you’re sending $1000, you don’t want to spend $20 in bank fees – that’s 2% of the amount you are paying. SMBs need small-value payments and need them frequently. Imagine paying $20 each time, coupled with a time-wasting trip to a bank branch?

At the end of the day, if you look at what international banking is, it was not designed for small businesses. Wire transfers are slow, and there’s no transparency about when the other party will receive the money. If your wire is delayed, and you call the bank and ask, they would likely say, “Oh, we’ll look into that.”

When the wire is further delayed, and you contact them again, you should be prepared to hear: “We’re actually still looking into that and awaiting a response from the receiving bank.” This running from pillar-to-post does not help reduce the stress of delayed payments and impacts the business, besides sapping the business owner’s energy and time.

When looking for a banking alternative, SMBs need to look into services that provide local bank accounts and multi-currency accounts so they can receive and make payments in whatever currency they require without being hopelessly dependent on wire transfers.

Effortless expensing

Teams need to be able to pay for business expenses in a streamlined way in the local currency wherever they are, without the company having to transfer money to them and incur wire fees in addition to currency conversion costs.

It’s always a hassle when you’re on a business trip abroad – if your corporate card gets rejected, you end up having to pay for things on your personal card. Then you fill out an expense report when you get back from your trip and wait for the expense reimbursement. If you are an SMB who needs access to global banking, you should be able to issue your employees international cards that work anywhere, so they don’t have to pay for expenses with their personal credit or debit cards.

For example, let’s say a US company has a team in Germany that you oversee. There’s a conference happening in Berlin that you and your team want to attend. What typically happens is you ask the financial controller in the US to send a payment to the conference organizer. Then, you have to send an invoice, follow up with the US office to make sure the payment was sent, and then speak with the organization to make sure the payment was received. A lot of back and forth creates the stress of uncertainty and takes away valuable productivity in the guise of admin work.

Instead, you could initiate payment from a corporate account directly to the event organizer; the back and forth gets eliminated. In addition, this sort of payment service enables and empowers employees to do their job with zero friction.

Corporate Visa cards linked to corporate spending accounts make it easier to manage purchases and corporate spending overseas in different currencies. With a modern banking system in place, these can then be tracked immediately by the financial controller with ease.

Make sure you find a service that can issue a card and ship it internationally to employees anywhere in the world. Unfortunately, most big banks that provide international banking cannot do this. Often, they will restrict the card to be issued in the name of US resident employees only. So, make sure to do your research to find the service that meets your business needs.

No-delay payday

When it comes to compensating your overseas teams, you need to be able to do so in a way that is fast and easy. This means paying them in the currency of their choice to the account they want to receive payment on payday.

Your finance department shouldn’t have to guess when wire transfers will arrive in your international employees’ bank accounts, so it’s best to research which service offers the most transparency; you should be able to track the progress of payments as money hops borders in real-time.

If you’re paying freelancers, skip the high cost of wire transfers by using a bank account that allows a seamless flow of money from your bank to theirs, so your finance department can keep track of the money on both ends and avoid unexpected delays. You could save at least $720 annually for each freelancer you work with.

As more companies seek new talent, resources, and clients overseas, and payment frequencies increase, the best way to stay competitive is to find an international banking service that offers a generous number of fee-free payments to help your business scale up. Several neobanks cater to the needs of SMBs and help cut down the excessive charges associated with wire transfers and the back and forth of expensing payments while reducing the uncertainty overseas talent face about receiving payments on time.

Often, businesses do not realize that the freelancer also pays a fee to their bank when they receive a wire transfer, which eats into their income. Some neobanks have inbuilt capabilities to pay freelancers in their own currency, thereby eliminating the burden of an additional fee. Pick a banking service that eliminates costs on both ends to make it easier to hire the best talent, wherever they are based.

All of these services should be just as accessible to your business just as easily as they are for large corporate enterprises. Cross-border banking is critical to enable SMBs to compete with large organizations, as it empowers them to do international business without the high cost.

Sandeep Todi, Co-founder, Truly Financial

Sandeep Todi is Co-Founder and Chief Business Officer at Truly Financial. He co-founded Truly Financial and Remitr to give SMBs better banking and payments. He has many firsts to his credit, including multi-currency accounting software, a global payroll product, and a community portal of nearly one million users.