Changing currencies is a crucial part of international trade but it can be a source of unnecessary cost, shaving SME profits in particular. James Tinsley, senior FX dealer at Currency Solutions, spoke to the Daily Update to explain how his own firm, and currency specialists more broadly, can help trading firms to cut costs and improve their margins with the use of virtual currency accounts.
Virtual currency accounts
“Twenty years ago,” Tinsley says, “if you wanted to make international payments, you’d have to do it through your bank, which was notoriously slow and expensive.”
FX brokers, he argues, have proven both quicker and more affordable. With global trade always increasing, it’s important for those exporting and importing “to be really dynamic in being able to pay overseas”, he says.
Virtual currency accounts can be set up in the name of a trader’s company, making their bank details available in 36 different currencies “at the click of a button”.
“We offer a global currency account that you can set up straight away.
“If you need to get paid overseas, instead of invoicing in sterling, you can invoice in your clients’ local currencies. It makes it a lot simpler to expand overseas, without worrying about the mechanics of how you set up finances and receive or pay funds.”
How it’s worked
Citing an example of how the solution has helped a company working across borders, Tinsley notes his work with a recruiting company being paid their foreign currency quotes into their pound sterling account.
“This was really, really expensive, around 3% in terms of the exchange rate coming back in,” he says.
“We set them up with a currency account so they could put the details on their invoices, send them out and then keep the balances in [the foreign currency] in their account instead of auto-converting into sterling.
“They could then pay those back out if they needed to or convert them with us into sterling at a better rate. It gave them a lot more options – it just makes doing business overseas a lot easier.”
He singles out the US as a market where these options are particularly useful, as US local banks “are notoriously bad at making international payments”.
Keeping up
Asked what advice he would give traders on currency, Tinsley urges speaking to a currency specialist.
“Even if you think you’re doing it in an efficient way, there may be something you’re not aware of or products that you haven’t used which could be really useful for cutting costs.”
FX can be a source of hidden costs for businesses, he emphasises. Those can range from payment costs to monthly fees for keeping accounts open or simply fluctuation in rates.
“It’s always good to assess these things on a yearly basis to make sure you’re doing it in the correct way – and keeping up with how your competitors are doing it.”