SMEs face numerous challenges. Here is our advice on why using a money transfer company is beneficial and what tools can help your business.

Forex Partner for SME

Lower fees

The term "squeezed middle", coined by the CEO of NEO Capital Market, Laurent Descout, describes the position of small and medium-sized enterprises (SMEs) when it comes to financial technology (fintech), especially regarding financial institutions and their forex solutions. Large, multinational corporates have the economies of scale to demand a better price. Similarly, institutions are willing to offer low-cost solutions to individuals because of their volume. In the middle are SMEs, which cannot benefit from the economies of scale or the volume of the consumer market.

SMEs frequently have little to no choice but to employ the same solutions as large corporations, resulting in expensive international transaction fees. Unfortunately, these fees are not always transparent and can cost a small fortune. A significant portion of these fees are eliminated when SME customers use a forex provider with banking relationships and trading licences.

Multiple currencies

Among the ‘squeezed middle’ are businesses that trade globally, make and receive payments in multiple currencies, and have international bank accounts. Imagine a shipping company dealing with international markets and 15 different currencies. Moreover, each of these currencies is held in separate accounts. This creates a number of problems, such as long lead times, high fees for conversion into local currencies, no way to see cash flow in real time and having to wait up to two weeks for some payments to be processed. With the right forex solutions, these problems can be managed effectively.

Currency Solved

One solution is using a platform that offers you wallets in a variety of currencies, that function similar to native-currency bank accounts. This enables you to conduct each transaction in its original currency, without having to worry about transfer fees.

Our Currency Solved platform offers live exchange rates and global currency deposits and withdrawals.

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Currency risk management tools

Currency risk management solutions can protect your profits, reduce your costs, and streamline international payments. A forex specialist can equip your SME with the ability to identify, assess and mitigate day-to-day currency risks while having the tools to take advantage of the associated opportunities.

Hedging with forward contracts

Forward contracts are agreements to sell or buy assets at a predetermined price and date. This strategy can limit the potential risk of exposure for an SME. These are non-standardised contracts between two parties that regulate the purchase or sale of a currency at a later date at a price agreed upon when the contract is initiated.

With these tools, you can plan your company's budgets and ensure that the exchange rate your SME enters is the same as the rate it has planned forward. Find a provider that does not charge a premium for forward transactions. Collateral deposits can be as low as 5% of the transaction amount, so you do not need to deposit the full amount in advance.

See also: Navigating forex complexities when paying employees abroad
Forex provider infographic

Market orders

A market order is a purchase or sale order that takes effect immediately. A "spot" trade is the simplest and most common type of market order, where you can buy and sell at the current market price. Unlike a market order, stop-loss and limit orders can be used to hedge some of the foreign exchange risks.

Stop loss orders

Stop-loss orders are used to limit losses. This function allows you to set a 'worst case' pricing that is lower than the current market rate. Your order will be completed if the market falls to or below the protected price.

Although many clients prefer these orders, they have similar problems to take profit orders in that the price can break out to the downside and then rise again, triggering your stop loss and the price is better shortly after.

Limit orders

A limit order specifies an upward price target. You specify a price target that is higher than the current market price; when the market hits your price, your order is completed instantaneously. This is advantageous for clients who have the time and tolerance to aim for a specific rate.

This service is a "set and forget" approach in which you do not have to actively monitor the market and your forex provider’s trading system purchases the currency once a particular rate is achieved.

See also: Will forex fintechs survive their own market disruption?

Customer service

For payments in foreign currencies, forex brokers offer a service that surpasses the services of banks. Since foreign exchange is only a fraction of the services banks offer, they do not place much emphasis on personalised customer service. In order to make money, banks often charge customers more than they should by hiding fees and surcharges in the exchange rate. As a result, if you make regular foreign transfers, you could be losing hundreds each year in hidden costs and undetected markups.

Few banks employ forex specialists, therefore few can provide insight into the volatile currency market situation. Forex companies, on the other hand, assign clients forex specialists who can provide experienced insight and limit the chance of loss on a forex transfer. Whether you are paying an international employee or transferring funds abroad, the quality of the service provided by forex brokers distinguishes them from banks.

It is very good practice to check how accessible your broker is and what their customer service is like before you commit to signing up with them. Testimonials and reviews are the best way to determine a company's client relations.

Our forex department provides personalised services to our clients with an average rating of 4.87 out of over 1300 reviews. As a foreign exchange specialist, personalised service is the backbone of our organisation and how we distinguish ourselves from banks. We value relationship-based service and go above and beyond to meet a client's specific needs quickly, cost-effectively and efficiently.

Sable International is a fully regulated and registered financial services provider in South Africa, the UK and Australia. If you’d like to transfer money out of South Africa, we can help. We’re online and always available for a chat if you have any questions. Email or call +44 (0) 20 7759 7554.

We are a professional services company that specialises in cross-border financial and immigration advice and solutions.

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