The online marketplace has experienced a significant boom in the last decade. Technological advances now give small and mid-sized businesses easy means to target international audiences. Fortunately, receiving payments from overseas is no longer as complicated or expensive as it was until a few years ago, with several service providers now offering multicurrency accounts for online sellers.
What is a Multicurrency Account?
A multicurrency account is one that lets you hold funds and transact in different currencies. Consider this – you have customers in the UK and Australia, through who you receive payments in British pounds and Australian dollars. With a multicurrency account, these payments go into accounts with matching currencies, and the money stays in the corresponding accounts for as long as you want.
Typical multicurrency accounts give you an efficient way to collect payments from a range of online marketplaces such as Amazon, eBay, Rakuten, Newegg, and Alibaba. Once you open such an account, you can expect greater control over the cost and timings of your payments.
Banks or Money Transfer Companies
Leading banks in most countries offer multicurrency accounts and so do some of the top overseas money transfer companies. However, the fees involved in maintaining and operating a multicurrency account with a bank are typically higher when compared with a money transfer company. Besides, banks also tend to add much higher markups to exchange rates that apply on your currency conversions. We’ve seen some banks charge 5% on currency conversion, plus charge a fee. That can cut directly into your bottom line.
Your bank will usually hold the foreign funds in your home country. That can make it harder and more costly to receive funds. Some FX providers will allow you to open virtual accounts in other countries to allow for domestic fund transfers.
A multicurrency account with any of the top money transfer companies comes with no account opening or ongoing maintenance fees. Depending on the company you select, you will have to pay little to no fees when receiving payments in accounts denominated in matching currencies. Nominal fees tend to apply when you withdraw money into your local bank account or send money to someone else’s bank account. Transfers from one currency account to another might also attract fees.
You typically get to choose when you wish to withdraw money into your local bank account, so this gives you greater control to tide over negative fluctuations in exchange rates. Some companies let you set up alert notifications, and this gives you the means to target desired rates. Depending on the company you work with, you might also be able to choose from forward contracts and limit orders.
With a forward contract, you may lock in an exchange rate for a withdrawal you wish to make in the future. Some companies let you lock in rates for up to 12 months. With a limit order, you get to target a rate, and once the market reaches the desired level the company you work with transfers your money automatically.
Benefits of a Multicurrency Account
If you receive payments from one or more foreign countries, you may benefit by opening a multicurrency account in different ways.
- Bank like a local. With receiving account details in multiple currencies, you get to transact like a local. When you receive and make payments using accounts with matching currencies, you do not have to worry about currency conversion.
- Cost effective. With highly competitive exchange rates and fee structures, good multicurrency accounts give you a cost effective way to manage international payments.
- Pay suppliers and employees. If you have overseas suppliers or employees, you may pay them using funds from accounts in matching currencies. No currency conversion takes place in these scenarios.
- Improve cash flow. You may choose to set up automated payments or withdraw your funds immediately, depending on how you want access to capital.
- Simplified monitoring. All your accounts in different currencies remain under a single umbrella. You get to use a unified platform to view balances and transaction details. This gives you the ability to spot any probable cash flow problem early.
- Receive payments from different channels. Depending on the company you select, you may receive payments through payment gateways, online marketplaces, or directly from customers.
How to Register?
The process to open a multicurrency account is largely similar no matter which company you select. You will need to start by submitting an online application. Your application might require supporting documents for the verification of your credentials. Copies of documents you might need to provide include:
- Government issued photo ID
- Proof of address
- Business bank statement or certificate of incorporation
If you open a multicurrency account according to your needs, you no longer have to worry about receiving international payments. Not only do you get control over the timings of your payment, you can also take measures to make the most of ongoing exchange rate fluctuations. However, make sure you compare your options before applying for any one account.