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The e-commerce industry is growing extremely fast nowadays. It went from $1,136 billion in retail sales in 2014 to $3,535 billion in 2019 and an estimated $6,542 billion by 2023, according to Statista. And now with the recent crisis, that growth rate has increased rapidly. Millions of people switched to online purchases out of necessity and many of them shop internationally.
It’s the rise of global e-commerce that caused such rapid growth in the popularity of multi-currency accounts. The service that used to be restricted to banks is expanding now as more businesses start to offer it. The fintech industry, in particular, is a major player in this field.
PayPal is, arguably, the most popular digital payment processing method for e-commerce. Amazon Currency Converter is also gaining popularity because it’s integrated with the world\s greatest online shopping platform. However, the demand for alternatives is still extremely high.
It’s easy to understand the reason for this because both these options are way too expensive for online sellers. Small entrepreneurs who sell their wares globally have a small enough profit margin as it is. With high fees and outright bad foreign currency exchange (FX) rates they lose a lot of money. For many, this kind of loss makes maintaining an international business unviable.
With Amazon Currency Converter you’ll lose about 3.5% of the transfer amount at minimum, and that’s not counting FX rates. The situation with PayPal is even worse. The fee is 5% of the transaction amount and you also need to pay a currency-specific fee as well as lose money because of unfavorable FX rates. And international bank transfers are even more expensive in the majority of cases.
With costs like this, it’s not surprising that sellers, and pretty much everyone else who needs to transfer money abroad, look for alternative providers.
In light of this, money transfer companies that used to focus on global payments for private and small businesses are now turning into multi-currency account providers. These are companies like TransferWise, OFX, and WorldFirst. They all specialize in quick and cheap foreign currency transfers. And they are rapidly expanding to offer their services in a greater number of countries and to a greater number of businesses.
WorldFirst, in particular, is now gaining popularity with online retailers. It has recently been purchased by Alibaba, which already gives the platform a shoo-in with one of the top e-commerce platforms.
In essence, multi-currency accounts offered by these companies are overseas collection accounts. They allow the user to hold a balance in foreign currency. The exact list of supported currencies varies depending on the provider. Users of these accounts should be able to spend the money in the currency of the account or exchange it to their native currency.
A great advantage of holding this kind of account with an international money transfer company is that those companies are renowned for their low FX rates. In fact, they offer rates close to mid-market. That’s because these businesses make their money off the volume of the transfers they process. Therefore, they can afford to keep their rates and fees low.
Multi-currency accounts available today vary greatly. Some of them will act very similar to your regular bank account. However, there are others with specific perks for every type of customer, including online retailers.
All these accounts can be managed online or using specialized mobile apps. One of their greatest advantages is the speed of transactions. Transfers through these companies can go through in a matter of hours.
Also, holding a multi-currency account will enable savvy users to make the most of foreign currency exchange rate fluctuations. If you watch the rates carefully, you will be able to save some money by exchanging currencies in your account at opportune moments.
TransferWise is the biggest and best-known name in the industry today. Therefore, you can be 100% sure about the security of your account. The company is also well-known for its transparency, so you don’t need to worry about hidden fees.
A multi-currency account from TransferWise allows you to hold up to 50 different currencies. It’s also available in a great number of countries, including the US. TransferWise service is very easy to use and it offers one of the best FX rates across platforms.
There is no minimum balance or transfer limit with TrasnferWise.
WorldFirst World Account is the best option for UK retailers. However, it’s also available in many other countries. After the acquisition by Ant Financial, the reach of WorldFirst has spread globally. Today it offers accounts even in Japan.
As the company is now owned by Alibaba, it offers a variety of services beneficial for online retailers, in particular. It also allows for transfers with less than 0.5% spread margin. The margin is fixed and depends on the yearly transfer volume.
The only issue is that there is a minimum transfer limit with WorldFirst.
OFX is a great option for online sellers and small businesses. The main reason for this is because OFX is, quite possibly, the most “global” provider in the industry. Its reach is wide and includes but isn’t limited to Australia, New Zealand, Hong Kong, and Canada.
According to info from the provider, it has a £20 billion turnover in a single year. It offers some of the lowest FX margins and indisputably one of the best customer service packages.
The minimum transfer amount is £100.
Moneycorp is one of the oldest international money transfer companies. It’s not as widespread in its global reach, but it does offer excellent service and a 0.75% fixed margin. This company has won multiple industry awards and its FX counsel service is one of the best.
This means that Moneycorp is a good platform for those who want to use it not only to process payments. It’s where you’ll be able to make the most of timely foreign currency exchange.
The minimum transfer amount for this account is £250.
There isn’t such a thing as the “ultimate best” multi-currency account because all of them have both pros and cons. Therefore, the “best” you can do is to choose the account that meets your specific needs in the right way.
The first factor to consider is what services are available in the countries you need to send to or receive money from.
If there are no restrictions in regards to locations and currencies for you, choose an account that offers the most benefits. Multi-currency accounts from money transfer companies are more than regular accounts. They also offer perks like hedging tools and counsel on how to use them most effectively. For small businesses and entrepreneurs that don’t have experience in FX trading this can be a great advantage. Hedging tools, in particular, offer a chance to reduce risks inherent to global trade.
Also, remember that all currency accounts are subject to a variety of fees. Even the most transparent companies won’t necessarily list all of the involved fees on their website. Therefore, you need to study the terms and conditions of every offer first.