Key Points:
- If you’re regularly making payments in another currency, there are two main benefits of using a multi-currency account
- It’s estimated that 93 percent of shoppers prefer to pay in their own currency
- If you regularly pay team members spread out across the world, this could be a strong reason to open a multi-currency account
Do I need a multi-currency account? What are the benefits of a multi-currency account for my business?
For many growing eCommerce companies, multi-currency accounts should be an essential part of their plan to expand globally.
While most banks offer multi-currency accounts hosted in one country, this article will focus on multi-currency accounts hosted in multiple countries, so you can truly do business like a local (e.g. instead of GBP and USD accounts in the U.S., providing USD accounts in the U.S. and GBP accounts in the UK).
If you’re someone who’s on the fence or wants to know more, here are some questions to ask yourself that can help you evaluate if opening one is right for your eCommerce business!
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Do You Work with Suppliers Overseas?
If you’re regularly making payments in another currency, there are two main benefits of using a multi-currency account:
- You don’t have to convert funds each time you make a payment
- You don’t have to deal with international transfer/SWIFT wait times and fees
For example, let’s say you’re a U.S. eCommerce company, and you source products from your European suppliers on a monthly basis. Instead of sending international transfers each month, a multi-currency account offers you the ability to hold euros locally in Europe, so you can simply send a local transfer every time you receive it. In this way, you cut out the wait times and no longer have to take into consideration how many U.S. dollars you need to send in order to match the invoice in euros (plus covering transfer fees!).
Are You Aiming to Reach a Global Customer Base?
It’s estimated that 93 percent of shoppers prefer to pay in their own currency. So if your goal is to expand globally and reach different customers around the world, you’re going to want to accept the local currencies of your target markets.
Depending on the volume of money you’re receiving, constantly converting your sales earnings from one currency to the next can have you feeling like you’re losing money on fluctuating exchange rates and fees charged by banks.
Set yourself up for success with the ability to accept payments in different currencies to cater to key markets around the world. A multi-currency account can help you do so that you’re not constantly converting your top accepted currencies.
This leads us to our next point...
Do You Already Accept Payments in Different Currencies?
A general rule of thumb in eCommerce circles is that you should support a new currency if there’s at least five percent of your customer base that uses it.
So if you’re already accepting payments in different currencies, it might make sense for you to have an account to directly receive and hold those funds that you accept in their respective currencies.
There are two main advantages of this are:
- You gain the flexibility to strategically wait until a more favorable exchange rate comes along before you transfer the funds
- If you also make payments using that currency, for suppliers or partners, for example, you eliminate the need to convert funds
For example, if you accept Hong Kong dollars from Hong Kong customers and also make payments to suppliers in Hong Kong and China, it makes sense for you to be able to both accept and spend HKD without converting it back to your local currency first.
Especially if you already use a payment gateway like Stripe, that automatically has the ability to accept payments in multiple currencies, a multi-currency account goes hand in hand with this.
Do You Have Team Members in Other Countries, or Expect to in the Future?
If you regularly pay team members spread out across the world, this could be a strong reason to open a multi-currency account. Or even if you’re still small scale, but work with freelancers in various parts of the world, this point can apply to you.
If you have team members in the markets you’re active in (or plan to expand your teams there), you’re likely already accepting funds in that local currency. So, if you’re accepting payments and also paying salaries in the same currency, it makes sense to have an account that’ll hold it.
What’s more, if you don’t have a multi-currency account and you’ve agreed to pay a freelancer in GBP for example, you have to take into consideration the exchange rate and fees as you send the funds over internationally.
Do You Use Multiple Accounts to Hold Different Currencies?
Perhaps you have a USD account in the U.S., a GBP account in the UK, and an HKD account in Hong Kong – all from different banks. If this sounds like you, then here are some follow-up questions: How long did it take to set everything up? What does your reconciliation and accounting process look like at the end of each month?
Simply setting up is so much easier with a multi-currency account, because you don’t have to continuously be applying for new accounts with new banks in new jurisdictions. A multi-currency account involves one application and unlocks multiple currencies.
Monthly accounting becomes more complicated when you have multiple accounts you use for your business and multiple transaction records downloaded from different interfaces. You simply have more tabs to open, more records to look at, and cross-check with your various invoices and documents. It can feel like the information you need is spread out all over the place.
Having a multi-currency account, however, brings all your funds under one dashboard, showing you an overview of the amounts you currently have. There’s only one login screen, and all your records can be found in one place.
What’s more, if everything is in one account, transferring funds from one currency to the next is simpler because you don’t have to go through the SWIFT network.
Is a Multi-Currency Account Right for You?
Hopefully, this article has helped give you a framework to think about whether or not your business can benefit from a multi-currency account. It may just be worth it!
Elizabeth Ching is the PR and Content Manager for Neat, a digital alternative to banks that offers businesses multi-currency accounts with local payment instructions in HKD, USD, GBP, and EUR. If you’re considering opening one yourself, you can learn more about it here.
