How to evaluate the total cost of FX when growing abroad

Expanding your business internationally opens doors to new markets, customers, and revenue streams. Yet beneath the surface of this exciting growth lies a complex web of foreign exchange (FX) costs that can silently erode your profits. International transfers are expected to increase five percent per year until 2027 ¹, making it more critical than ever for businesses to understand and manage their FX expenses effectively.

The challenge isn't just about spotting the obvious fees. It's about uncovering the hidden costs buried in exchange rate markups, transaction delays, and operational inefficiencies that traditional financial systems often obscure. With 195 countries all having their own payments systems, regulations, and levels of technological maturity ¹, navigating this landscape requires both strategic thinking and the right financial partner.

The hidden layers of FX costs

When you're evaluating FX costs for global expansion, the headline exchange rate is just the beginning. Banks can charge up to 4% on international transfers ², but that's often not the full story. The real cost of FX includes multiple layers that many businesses overlook until they see their margins shrinking.

Exchange rate markups

Banks often claim that they don't charge any fees or commissions but profit significantly from the spread between the mid-market rate and the conversion rate they offer to their customers ². This spread can vary dramatically depending on your provider, the currencies involved, and even the time of day you make the transfer.

Consider the impact on a growing business: if you're processing international payments worth millions annually, even a 1% difference in exchange rates can translate to tens of thousands in additional costs. International transaction fees associated with cross-currency transactions and conversions are typically 1% – 3% of the value of the transaction ³, adding another layer of expense that compounds over time.

Transaction and processing fees

Beyond the exchange rate itself, businesses face a maze of transaction fees. There are three key types of foreign transaction fees: currency conversion, dynamic currency conversion, and cross-currency transactions ³. Each of these can add unexpected costs to your international operations.

The complexity multiplies when you consider that 84 percent of payments are now either direct payments or they have one intermediary ¹. Each intermediary in the payment chain may add their own fees, creating a cascade of costs that are difficult to predict or control.

Time-related costs

Speed matters in business, and delays in international payments carry their own costs. While 89 percent of payments that flow through the Swift network arrive at the destination bank within an hour ¹, the remaining transactions can take significantly longer, tying up working capital and creating cash flow challenges.

According to data analytics company LexisNexis, up to 50 percent of payments that don't complete or are delayed are due to simple data entry problems ¹. These delays don't just cost time – they can damage supplier relationships, delay inventory shipments, and create ripple effects throughout your supply chain.

Real-world impact on growing businesses

The true cost of FX becomes clear when you look at real businesses navigating global expansion. Take the fashion industry, where brands like Thats So Fetch, founded in 2018, have built communities of over 350,000 followers on Instagram and more than 2 million likes on TikTok ⁴. As these brands expand internationally, FX costs can make or break their profitability.

Supply chain complications

Global supply chains face additional FX challenges. In early 2016, a luxury brand turned to Ryder to manage all its distribution requirements for wholesale, retail and D2C businesses throughout the U.S. and Canada ⁵. Managing payments across multiple currencies for suppliers, logistics providers, and retail partners creates layers of FX exposure.

The situation becomes even more complex with recent trade developments. On April 2, 2025, President Trump issued Executive Order 14257, implementing a reciprocal tariff policy initially imposing a 10% baseline duty on all imports ⁶. These tariffs add another dimension to FX cost calculations, as businesses must factor in both currency fluctuations and trade policy changes.

Market volatility and risk

2025 has marked a turning point for global stock markets, with U.S. stocks facing dramatic decline and European markets surging ahead ⁷. This volatility directly impacts FX rates, making cost prediction even more challenging for businesses operating internationally.

U.S. tech stocks have suffered significant sell-offs in the past three months, with Nvidia dropping 21.6% year-to-date ⁷. These market movements create currency fluctuations that can dramatically affect the real cost of international transactions.

Building a comprehensive FX cost evaluation framework

To truly understand your FX costs, you need a systematic approach that captures all the variables affecting your international payments. Real-time payments systems are expected to generate $173 billion in additional economic output by 2026 ¹, highlighting the importance of efficient payment infrastructure in your evaluation.

Direct cost analysis

Start by mapping all direct costs associated with your international transactions:

Exchange rate spreads: Track the difference between mid-market rates and the rates you're actually receiving. Small businesses are more vulnerable to the impact of tariffs, facing higher costs of goods, supply chain disruptions, and reduced global competitiveness ⁸.

Transaction fees: Document all fees charged per transaction, including both fixed and percentage-based charges.

Monthly or annual account fees: Many traditional providers charge maintenance fees for international payment capabilities.

Wire transfer fees: These can range significantly depending on the provider and destination country.

Indirect cost assessment

The indirect costs of FX often exceed the direct fees:

Cash flow impact: Delays in payment processing tie up working capital. Consider that payments in US dollars can take a few days and cost a lot, with charges taken by corresponding banks ¹.

Administrative overhead: Manual processing, reconciliation, and error correction consume valuable staff time.

Opportunity costs: Capital locked in slow payment processes could be deployed more productively elsewhere in your business.

Relationship costs: Payment delays or errors can strain supplier and partner relationships, potentially affecting negotiating power and terms.

Risk and compliance factors

Regulatory compliance adds another layer to FX cost evaluation. With 90 percent of central banks globally currently working on developing Central Bank Digital Currencies ¹, the regulatory landscape is evolving rapidly.

Offshore bank accounts often come with high fees, complex setups, and strict regulatory checks ⁹. These compliance requirements translate into both direct costs and operational complexity that must be factored into your total FX cost calculation.

The Airwallex advantage: transforming FX cost management

Navigating the complex world of FX costs doesn't have to be overwhelming. Airwallex offers a comprehensive solution that addresses each layer of FX expense while simplifying global financial operations.

Transparent, competitive pricing

Airwallex provides interbank FX rates and currency management ⁹, eliminating the hidden markups that traditional providers build into their exchange rates. This transparency allows businesses to see exactly what they're paying and make informed decisions about their international transactions.

McLaren Racing modernized cross-border payments with Airwallex ¹⁰, demonstrating how even organizations operating at the highest levels of international business benefit from streamlined FX management. The McLaren Racing team, which has won 8 F1 constructors' championships and 12 F1 drivers' championships ¹¹, requires precision in every aspect of operations – including financial management.

Multi-currency capabilities

Airwallex offers multi-currency accounts to receive funds, high-speed international transfers, and multi-currency company & employee cards ⁸. This integrated approach eliminates the need for multiple banking relationships and reduces the complexity of managing international finances.

Offshore bank accounts let you hold funds in foreign currencies, reduce FX costs, and manage international transactions more efficiently ⁹. With Airwallex's global accounts, businesses can hold and manage multiple currencies without the traditional complications of offshore banking.

Operational efficiency

Beyond cost savings, Airwallex streamlines operations through automation and integration. The platform offers automated accounts payable management and expenses & reimbursement management ⁸, reducing the administrative burden of international financial operations.

RYSE transformed complex cross-border finances into streamlined, cost-saving, and efficient global operations with Airwallex ¹². This transformation isn't just about reducing costs – it's about freeing up resources to focus on growth and innovation.

Practical steps to optimize your FX costs

Taking control of your FX costs requires both strategic planning and the right tools. Here's how to implement a comprehensive FX optimization strategy:

1. Conduct a comprehensive audit

Start by analyzing your current FX expenses across all dimensions. Stockford Limited's savings across the group over a six-month period have been into USD six figures ², demonstrating the potential impact of systematic cost evaluation.

Document every international transaction for at least three months, including:

• Exchange rates received versus mid-market rates

• All fees charged (visible and hidden)

• Processing times and their impact on cash flow

• Error rates and associated correction costs

2. Implement multi-currency accounts

Reduce unnecessary conversions by holding funds in the currencies you use most. Airwallex provides multi-currency accounts to receive funds ¹², allowing you to time conversions strategically rather than being forced to convert at unfavorable rates.

3. Automate and integrate

Manual processes increase both costs and errors. Singapore has recently integrated its real-time PayNow network with faster payment networks in India, Thailand and Malaysia ¹, showing how automation and integration are transforming international payments globally.

4. Monitor and optimize continuously

FX optimization isn't a one-time exercise. Markets in Germany, France, and the UK have gained momentum due to a manufacturing revival ⁷, illustrating how quickly market dynamics can shift. Regular monitoring ensures you're always getting the best value.

Looking ahead: the future of international payments

The landscape of international payments continues to evolve rapidly. Blockchain technology has the potential to support near-instantaneous transactions and automate complexity ¹. As these technologies mature, businesses that have already optimized their FX operations will be best positioned to benefit.

The J.P. Morgan blockchain division has conducted successful simulations to test the technical feasibility of cross-border transactions in Singapore dollar and euro CBDCs ¹. These developments suggest a future where international payments become even more efficient and cost-effective.

Making the switch to smarter FX management

Evaluating the total cost of FX when growing abroad reveals a complex picture that goes far beyond simple exchange rates. From hidden fees and processing delays to compliance costs and operational inefficiencies, traditional approaches to international payments can significantly impact your bottom line.

Airwallex offers a comprehensive solution that addresses each of these challenges. With transparent pricing, multi-currency capabilities, and streamlined operations, businesses can transform FX from a cost center into a competitive advantage. Companies like McLaren Racing and RYSE have already made this transformation, turning complex cross-border finances into efficient, cost-effective operations.

The question isn't whether you can afford to optimize your FX costs – it's whether you can afford not to. With international transfers growing five percent annually and market volatility increasing, the gap between businesses using modern FX solutions and those stuck with traditional providers will only widen.

Take the first step toward smarter FX management. Evaluate your current costs, identify the hidden expenses, and discover how Airwallex can help you capture more value from every international transaction. Your global growth deserves a financial partner that moves at the speed of modern business.

FAQ

What are the hidden costs of foreign exchange when expanding internationally?

Hidden FX costs include exchange rate markups, intermediary bank fees, correspondent banking charges, and operational inefficiencies. These costs can significantly erode profits as international transfers are expected to increase 5% annually until 2027 according to J.P. Morgan research.

How can businesses avoid the conversion trap in international payments?

Businesses can avoid conversion traps by understanding true exchange rates, comparing provider markups, and using transparent payment solutions. Airwallex helps ecommerce businesses navigate these challenges by offering competitive rates and clear fee structures without hidden conversion costs.

Why are cross-border payments becoming more complex for growing businesses?

Cross-border payments are complex because 195 countries have their own payment systems, regulations, and technological maturity levels. However, 84% of payments now have either direct processing or just one intermediary, making efficient FX management crucial for competitive advantage.

What impact do current tariff policies have on FX costs for international businesses?

Recent tariff policies, including the 10% baseline duty on imports and country-specific tariffs for 57 nations, are reshaping global trade flows. These changes affect currency volatility and FX costs, making strategic payment planning essential for businesses expanding abroad.

How can offshore bank accounts help optimize FX costs for global businesses?

Offshore bank accounts can reduce FX conversion frequency, minimize currency exposure, and provide better exchange rates for international transactions. They allow businesses to hold multiple currencies and time conversions strategically, reducing overall FX costs during global expansion.

What should businesses consider when choosing a business account for international operations?

When selecting a business account for international operations, consider multi-currency capabilities, transparent FX rates, global payment infrastructure, and regulatory compliance. The right account should support your expansion goals while minimizing hidden fees and conversion costs.

Citations

1. https://www.jpmorgan.com/payments/payments-unbound/volume-3/cross-border-payment-modernization

2. https://www.moneymover.com/customer-stories/stockford-limited/

3. https://www.airwallex.com/ca/blog/how-to-avoid-international-transaction-fees

4. https://www.ryder.com/en-us/insights/case-studies/e-comm/startup-to-fashion

5. https://int.ryder.com/fr-ca/insights/case-studies/e-comm/tailored-solution

6. https://www.woodsrogers.com/insights/publications/tariff-tsunami-understanding-the-presidents-trade-order

7. https://thesun.my/business-news/media-outreach/vt-markets-exclusive-analysis-global-capital-may-shift-amid-tariff-shock-and-ai-disruption-FK13912430

8. https://www.airwallex.com/ca/blog/tariffs-business-impact

9. https://www.airwallex.com/ca/blog/offshore-bank-account

10. https://www.airwallex.com/ca/blog/ecommerce-businesses-navigate-trade-realities

11. https://abmagazine.accaglobal.com/global/articles/2023/oct/interviews/front-of-the-grid.html

12. https://www.airwallex.com/ca/blog/what-is-a-business-account