Are you paying too much to be global? How to sell in foreign markets without paying too much in fees

Evan Dunn3 minutes
Are you paying too much to be global? How to sell in foreign markets without paying too much in fees
In this article

As a US seller in a foreign market, maintaining an astute eye is vital to keeping your overhead costs at a minimum. Account fees can quickly add up when selling overseas and often become unmanageable if you don’t keep a close eye on what you’re paying for.  

Your global business account needs will differ based on the industry you’re in and how much revenue you pull in from overseas. But regardless of your type of business, there is some common ground when it comes to account fees.

Here we’ll take a look at how you can avoid fees in your supply chain — from buying, to the marketplace, and with a supplier — so you aren’t paying too much to be global.

Payments involved in the supply chain

Reducing your supply chain and inventory costs will improve your business’s visibility so that management can better communicate with vendors. The purchase to pay (P2P) process connects procurement and entire supply chain processes through the goods receipt process, and eventually to an issued payment to a vendor.  

Improving operational performance and making better financial decisions, as well as reducing supply chain costs and freeing up cash, will better your P2P process. This increases visibility in your company so that management can better communicate with vendors on the delivery process and payment areas. 

Elements of the P2P process include:

  • Sourcing: Researching vendors for a product or service to find the best quality item at the best price

  • Contracts: Purchasing departments and vendors establishing a contract based on price, payment terms, and delivery schedules

  • Purchasing: Electronically sending purchase orders to allow visibility of delivery progress information and advanced shipping notices (ASN)

  • Goods receipt: Following shipment to a customer from a vendor, any issues are received and discounts or returns can be arranged

  • Invoicing: Streamlining invoices to customers through electronic solutions so that purchase orders are in an accounts payable system

  • Invoice processing: Contracted vendor discounts applied for customers before payments are due

  • Analytics: Constant monitoring of company spend to depict areas of concern such as increases in vendor pricing, rogue spending, and more

Supply chain factors to consider as a global business

There are many different types of buyers. A pharmaceutical buyer isn’t the same as a healthcare buyer, just as a retail buyer is different from a manufacturing buyer. 

And your purchase amounts and fees will differ as a result.

Understand market fluctuations

All buyers need a deep understanding of the specific markets that they operate in, which help with avoiding potentially unnecessary fees. This goes for the actual market area you’re in, as well as the marketplace platform you use as a medium between buying and supplying.

Markets are often unpredictable. Global businesses need to remain aware of any fluctuations that affect their operational costs, as well as how foreign exchange (FX) rates can impact what was already purchased. 

Develop strong relationships

Buyers also need to develop strong relationships with their suppliers. Otherwise, the supply chain can fall weak and unable to cope with sudden variances. This puts the successful flow of supplies at risk. 

Trustful relationships with suppliers also ensure that agreed-upon prices remain the same, and that supplies are delivered on a punctual and consistent basis.

Consider your options

It’s also important for suppliers to remain aware of what is on offer and its price. Sourcing goods from only one supplier can be detrimental to your finances because there might be a better rate elsewhere. 

It’s normal for buyers to work directly with overseas suppliers to ensure the supply chain is stable. But it’s always best to keep a watchful eye on competitors to achieve the best deals.

Considering legacy payment solutions

Legacy payment solutions perform the critical functions necessary to handle business payments. The system your business chooses to use should be strategic since your business operations revolve around it. 

​​Regardless of whether your business is well established or new, it’s not too late to establish a payment system that works best for your business and the types of financial activity you perform the most. 

Transaction fees

PayPal is a commonly used payment system, along with its competitors, Stripe, Square, Braintree, and even Google Pay. 

When signing up with PayPal, your default transaction rate is 2.99% plus a 49-cent transaction fee. Your PayPal transaction rate will lower to 2.59% plus the same 49-cent transaction fee when you choose an advanced credit/debit card payment. You’ll also have Chargeback protection with an advanced payment method. 

At first glance, Stripe and Square are more competitive than PayPal with their lower rates per transaction. Stripe has base transaction fees as low as 1.82% plus 30 cents for a successful transaction, but their standardized fee rate is 2.9%. Square charges 2.6% per transaction plus a 10-cent successful transaction fee. 

However, all legacy payment solutions have slightly different use cases with varying advantages. The best-suited payment system for your business is dependent on the features you need — whether that’s a point of sale system, website integration, or something else. For example, PayPal will integrate with your website, whereas Stripe will not.

Maintenance fees 

Legacy payment systems need constant software updates and can cause your business to increase its budget up to 15% for maintenance alone. If your payment system is struggling to meet customer expectations, or if it has become inflexible and costly due to excess fees from different providers, it’s time to integrate with a new system. 

Lack of financial control 

PayPal, for example, or using a variety of PSPs or individual acquirers, won’t allow you full control over your payments. Security and transaction limits, feature updates, and most importantly, fees, lie outside of your agency’s control. 

High transaction fees and “gotcha” charges put your company’s overhead costs at very high levels, especially if your business fulfills numerous transactions on a regular basis. 

Some questions to consider about your payment system include:

Considering legacy banking solutions

Legacy banking solutions through Chase, Spark by Cap1, and more often have high transaction fees and monthly to annual costs that significantly increase your business’s budget. 

Large financial institutions will impose fees on their business customers for account setup, maintenance, and transactional services. These fees are sometimes one-time, but they’re often administered on an ongoing basis.

The national average for annual checking account maintenance fees in the US is $169.56, according to Money Rates. And this doesn’t include transfer and withdrawal fees, overdraft fees, ATM charges, and much more. 

Withdrawal and transfer fees, ATM fees, late payment charges, insufficient fund fees, and account maintenance fees are all factors you’ll deal with as a global customer using legacy banking solutions. 

Of course, there are better picks of the bunch. For example, Capital One Spark Cash for Business — although as of recently its services are no longer available — was the only major small business card that provided unlimited 2% cash back for purchases. Its initial annual fee was $0, then climbed to $95, which was worth it for small businesses making a substantial amount of transactions. 

Banks’ primary method of receiving revenue is through net interest charges, but a very large portion of their income comes from their account fees. This calls into question if managing finances at a global level through legacy bank solutions is such a great idea.

Mitigating foreign exchange risk

Carefully considering FX risk is key to avoiding high or excessive fees. Staying aware of all fluctuation triggers, such as global political risk trends, can save you large amounts of money. 

Financial hedging is one way to manage FX risk. But there are other approaches that businesses take to mitigate risk. The Supply Chain Quarterly uncovered five principles that companies should consider when creating a mitigation strategy for supply chain FX risk. 

These principles have a supplier-facing perspective in a supply chain, but they also consider downstream and internal exposure to FX risk. The five principles include:

  1. Upfront flexibility 

  2. Observing a supply chain’s upstream and downstream

  3. Including multiple sources of cost uncertainty

  4. Practicing numerous approaches for risk mitigation 

  5. Considering relationships

Pay less in fees as a global business with Airwallex 

Airwallex offers an easy-to-use payment platform with varying advantages over other payment solutions. 

Our global business accounts are available in various currencies, including USD, EUR, GBP, and AUD without ever having to visit a local bank branch. You can easily send and receive funds in any of our available currencies with zero transaction fees and outstandingly low FX rates to keep your business’s bottom line where you want it.

You can also automatically sync your domestic and international transactions with Xero to better manage your accounting. This makes it especially convenient to use our borderless cards

Your business payments will run more efficiently with Airwallex as your payment solution. We prioritize the ROI of your business and the satisfaction of your customers just as much as you do. 

Contact Airwallex to pay fewer fees in foreign markets

If your company is currently working on a global scale, or if you're considering expanding, contact Airwallex. We’ll help you establish better control over your foreign currency accounts so you aren’t paying too much in fees. You can make international money transfers in multiple currencies, in one business day or less.

Call +1 (855) 932-3331 or sign up and start saving money today!

Related article: What are the benefits of virtual payment cards?

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Evan Dunn
Growth Marketing Lead, US

Evan Dunn manages the growth of Airwallex's SMB business in the US through marketing avenues. Evan is a generalist with expertise in SEO, paid media, content marketing, performance marketing and social selling. He also enjoys slam poetry and waffle making.

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