The foreign exchange (FX) market of 2020 has gone through some severe shifts and still a lot of uncertainty remains. Every business franchise that has to use international money transfers is now at a higher risk due to its FX exposure. Learning how to manage your currency exchange better with the help of Australian money transfer companies can be essential for your success. One needs to understand that the COVID-19 crisis has changed consumer behaviour in profound ways. Focusing on international online commerce is now one of the best methods to keep your business afloat through the global recession.
2020 Year of Uncertainty and Changes in Foreign Exchange Rates
The global economy is currently going through the worst downturn since the Great Depression, according to IMF. Unsurprisingly, this crisis had a huge impact on the foreign exchange market. The majority of currencies were badly shaken, with developing economies hit the hardest of all.
However, the greatest currency shift of 2020 was, no doubt, the decline of the USD index. Geopolitical Intelligence Services (GIS) reports that the US Dollar’s fall against Euro and other top-traded currencies is not only a response to the reduction of global trade flows. More importantly, investors are starting to lose faith in this currency and in America’s economy.
For anyone dealing with international money transfer services, this is huge. The USD has been the world’s reserve currency for a long time. Therefore, all international trade has taken the USD exchange rate into account in some way. However, now the Dollar might lose this status.
This is bringing even more uncertainty into the already tumultuous FX market. Should the Dollar continue to decline with more investors choosing other currencies, it’s impossible to say what will replace it. One could make an argument for Euro, the Pound Sterling or Yen. However, all of them are going through their own struggles with the recent crisis.
One also cannot discount the growing economic power of China and therefore the renminbi, which we better know as the yuan. There is also talk about the launch of digital yuan, which might take international money transfer services to a new level. This particular issue highlights the rise of cryptocurrencies, which might also pose competition to fiat currencies.
The Australian Dollar is a big part of the FX market being the fifth most-traded currency in the world. Therefore, Australian business franchises need to be alert to the changes in currency flows.
International Money Transfer: Essential Tool for Online Commerce
No one can argue that it’s hard to increase your profit during difficult economic times. However, now everyone needs to look for ways to achieve this because this global economic recession will last for a while. The first thing you need to do is to understand the changes in consumer behaviour and adjust your franchise’s tactics accordingly.
The most notable change was the growth in the use of digital online commerce. Online shopping has been increasing in popularity for years. However, the pandemic crisis pushed it forward at an unprecedented rate. Moreover, according to data from UNCTAD, corroborated by multiple business experts worldwide, this change is permanent. This means that making an international money transfer on a regular shopping session will soon become the norm for everyone.
Notably, developing economies show the highest rate of eCommerce growth right now. Therefore, consumers from these countries could become a lucrative target audience for Australian business franchises. Already over 70% of Australia’s eCommerce businesses target US customers. Now, they can expand their global reach.
However, doing this will mean getting much more involved in the foreign exchange markets. Franchises offering their goods and services to other countries will also soon notice that making any international money transfer can be very expensive. The cost of the transaction alone might make it impossible for you to have a competitive advantage on the global market.
Therefore, business franchises should start researching international money transfer options they can offer to foreign customers. Traditional banks aren’t a good choice because they offer highly unfavourable foreign exchange rates and have high fees. Depending on the bank and currency pair, one might end up paying over 3% of the transfer volume in fees. With exotic currencies this can reach 10%. Online money transfer companies offer a solution.
How to Find a Reliable Australian Foreign Exchange Provider
If you want to save money on exchanges and avoid big international money transfer fees, you’ll need to start looking for the best Australian foreign exchange companies. The rates and terms offered by these businesses differ depending on the company, currency pair, and the size of transfer. However, on average, this type of transfer won’t cost much more than 1-2% of the total volume.
Business franchises that consider starting international partnerships will be happy to know that large transfers are usually cheaper. They can cost you less than 1% and the company might even offer you to use the mid-market foreign exchange rate. This is why sometimes choosing the company with the lowest fee might not be the best choice for every transaction.
Another reason to start using the services of money transfer companies is that they offer multi-currency accounts with great terms. These accounts allow you to accept payments in multiple currencies. Moreover, they offer a good foreign exchange rate. Some accounts also allow you to hold a balance in multiple currencies and use the money for making local payments in foreign countries. For example, you can use this to pay suppliers or remote employees abroad without having to exchange the money in the interim.
When choosing money transfer companies you also need to consider the corporate services they offer. As a business franchise owner you can greatly benefit from using hedging tools. Banks usually offer those only to large corporate and VIP clients. However, with online money transfer companies currency hedging is available even to small businesses.
Hedging will enable you to do things like making a trade when the fluctuating foreign exchange rate is at its best. You can also use forward contracts to secure a rate for future transfers.
Best Money Transfer Companies in Australia
Australian Foreign Exchange Companies
OFX Money Transfer
If you are interested in Australian money transfer companies specifically, you need to look at OFX first. This is a foreign exchange giant that keeps growing and partnering with other companies to expand worldwide. The company is one of the most trusted international money transfer providers worldwide. Its transparency is one of the key factors that make OFX an outstanding choice for business franchises. Another is its great multi-currency account for businesses.
OFX has multiple offices in top countries and local bank accounts in the UK, the USA, New Zealand, and Hong Kong. It also has a great smartphone app, which also makes it easy for consumers to use. The company currently has 115 bank accounts worldwide, which allows for fast and easy local settlement in the most popular countries for Australian businesses.
OFX annual trading volume has reached $20 billion. The majority of transfers have zero fees.
Transfermate is an Australian-based but rather small international money transfer company. It launched in 2010 and has been slowly building a loyal customer base. Note that the minimum transfer with this company is $1,000, which means it won’t be suitable for smaller eCommerce franchises.
However, it must be noted that despite being small, this company has offices in several countries, including Italy, Spain, the Netherlands, the USA, Bulgaria, and Poland. It is also a registered and authorized money transfer company in the EU, the USA, Australia, New Zealand, Canada, Singapore, and Hong Kong.
The fees are very low and the company has won several awards as a promising and innovative fintech. Customer reviews indicate that people are mostly satisfied with Transfermate and the service it offers. But the company doesn’t offer a handy smartphone app.
Paysend is another international money transfer provider from Australia that deserves attention. This company only launched in 2017 and it is small. At the moment, it only accepts international clients from the UK and EU. You can send money to over 70 countries with it and there is a nice mobile app for easy use. The company is regulated by the FCA and HMRC and has offices in Scotland, London, and Russia.
Transfers are available at a flat fee, which can be both good and bad. The customer satisfaction rate is high according to platforms like Trustpilot. However, the onboarding process for this company is rather complicated. You will need to register several important documents to open an account with it.
International Money Transfer Companies with Offices in Australia
While it’s always tempting for Australian business franchises to use the services of Australian money transfer companies, this industry doesn’t require that. In fact, OFX is the only Australian company that is among the industry leaders. And being among these matters greatly for this business because the higher currency trade turnover the company has, the better rates it can offer.
However, having an established local presence and licensing is also very important. Therefore, when using the services of foreign companies, you should give preference to those with offices and licensed in Australia. This will allow you a better selection of foreign exchange providers with low fees and very interesting service packages. The most notable among them are:
TorFX is one of the international money transfer industry veterans based in Cornwall. It has won multiple awards and is one of the most trusted money transfer companies that’s growing fast. It has great customer reviews and staff of highly-qualified and experienced traders.
The minimum transfer with TorFX is $100 and the company charges no fees per transfer at all. It currently has offices in the UK, Australia, and Singapore. TorFX is regulated by the FCA and ASIC in Australia. Its annual trading volume is around $7.5 billion. An important consideration for business franchises is that TorFX has a perfect Level 1 credit rating.
Even if you haven’t used the services of money transfer companies before, you might have heard of TransferWise. This is an industry giant that has reached over $5 billion in valuation. It is definitely one of the cheapest and best options for small international money transfers worldwide. The transfers are cheap, but they don’t get cheaper as the volume increases. Therefore, they are good for accepting retail eCommerce payments, but not the best for making large transfers to your suppliers.
TransferWise is completely transparent and one of the most trusted and reliable businesses in the money transfer industry. The company has a lot of attention on it and you can be 100% sure all transfers and rates are honest and straightforward. It has an excellent app and is overall very easy to use. The minimum transfer is $1 and the company’s turnover is $4 billion a month.
Moneycorp is one of the oldest money transfer companies in the industry and its reputation is unblemished. Its trading volume is nearing $40 billion a year and the company is most popular with large businesses and investors. It offers excellent terms and foreign exchange rates for larger transfers.
Note that Moneycorp holds a banking license issued in Gibraltar. The company offers a wide range of services that go beyond making an international money transfer. It also has the best credit rating in the industry.
Moneycorp does offer a mobile app, but it’s not very easy to use. However, the company’s customer support service is excellent and you can use the web app to manage all your foreign exchange and transfers.
In Conclusion: Developing Foreign Exchange Strategy for Franchise Survival in 2021
There are quite a few things you can do to keep your business franchise successful in 2021. Developing an efficient foreign exchange management strategy should go onto that list because of the importance of international commerce for Australian businesses. Luckily, today Australian business franchises can use money transfer companies to save quite a bit on international transfers.
When choosing the best company, you need to remember that being based in Australia isn’t the most important requirement. The majority of industry leaders only have local offices, which is sufficient for this type of international business. The things you should focus on when researching money transfer companies are fees, foreign exchange rates, terms, and hedging tools availability.