This blog comes from our friends at BagsAway Luggage Storage. BagsAway provides travellers with secure luggage storage locations in local shops, cafes, and hotels all around the world. They have over 400 locations worldwide in countries including the US, Canada, Australia and England. As a result, BagsAway is very familiar with the struggle and cost of managing payments in multiple currencies.
In this post, they outline the various issues they faced…and the solution they’ve implemented.
Any company that does business globally knows the complexities around managing multiple currencies. In hospitality, it’s a daily effort. Dealing with travellers is the name of the game, and the customers come from all over the world. They research their next destination online and book through the channels of their choosing. It’s convenient, and it provides the venue with a critical revenue stream.
On the customer-facing side, everything is perfect. On the back end, however, there are some caveats. Third-party fees aside, the cost of converting currency back and forth across international lines can be high. If you do a lot of business internationally, it certainly adds up.
How Dealing With Multiple Currencies Impacts Business
Global businesses and marketplaces face a constant struggle to pay partners and affiliates in multiple currencies.
BagsAway, for example, is an international luggage storage service – a marketplace that works with small businesses all over the world who act on our behalf. Affiliates sign up with BagsAway, and we then market their location to travellers and pay them directly for providing services. We deal with affiliates and partners in Mexico, the Middle East, Canada, the United States, Asia, and South America.
Each partner in every location is paid in local currency. Without access to a local bank account, we are forced to convert payments that come in through the site from the local currency to USD, and then back to local currency to pay each partner.
For example, in Mexico, BagsAway charges customers in pesos. The payment processor would then convert those pesos to USD, charging us a fee for both the transaction and the conversion. At the end of the month, the company has to pay out, so now we have to convert USD back to MXN, incurring additional costs.
If you think this sounds complicated—and expensive—you’re not wrong. And there is more than one way that it costs you.
Cost Factor #1: Transaction and Currency Conversion Fees
Though we’ve already outlined this cost factor, let’s take a deeper dive. Here’s an example of how international currency and transaction fees affect the global hospitality and travel sector.
While many outlets simply write off currency-conversion fees as the cost of doing business, others feel that it just isn’t worth it. In smaller venues, it’s always a struggle to balance the convenience of online booking channels and ecommerce with the cost. Ultimately, if you’re not doing global business, this won’t be a concern. For those who do, it’s critical to hang on to that bottom line. Every dollar counts, and higher fees on the back end must, ultimately, be passed on to the customer. And this might force you into a less competitive price point.
Forcing our customers to take extra steps, like calling us directly to provide credit card info, wasn’t the answer either. While it does eliminate one link in the chain, it is inconvenient for the customer, and you stand to lose the sale altogether. Plus, even though we would be taking the payment directly and cutting out the intermediary, it does not fix the problem entirely. We’d still have international currency conversion fees to deal with, both through our payment processor and the bank.
Cost Factor #2: Operational and Administrative Overhead
The other mitigating factor in all this is that it’s extra work for the admin and finance teams.
Breaking out the various fees from disparate sources and data controllers is complicated. In any given transaction, there might be four or more separate fees levied against the amount. You’ll pay your typical monthly account fees, of course. Then you’ll pay the cost to convert the currency – twice if you’re paying out partners or affiliates. Next, there is the transaction fee. While some banks don’t charge for incoming funds, others do. It all depends on your agreement.
All these extra determinations, not to mention the intensive ID verification process, plus data entry and reconciliation, takes a lot of valuable time that could be better spent on customer service, marketing, or other high-value tasks.
Cost Factor #3: Fluctuating Exchange Rates
Today’s volatile markets make international exchange rates highly unpredictable. In the past year alone, the US dollar has been up and down with a margin of about eight percent. Some of those fluctuations occur day-to-day, and that means when you transfer low, you stand to lose – big time.
The trouble with many of these types of transactions is that you often don’t have a choice in terms of when the money is transferred to your bank. Generally, your processor will deposit the funds on the day you made the sale. If the exchange ticks up a few points overnight, you’re essentially leaving money on the table.
It’s a vicious cycle. But it doesn’t have to be this way.
The Solution to Your Multiple Currency Woes
With the prevailing trend towards globalization, you would think that many of these common issues would have been addressed. The truth is, unless you actively seek a solution, it will always be a pay-to-play situation.
The Remitr Global Business Account (GBA) simplifies international payments and helps save money by allowing you to:
– receive payments in USD, EUR & GBP like a local business
– send payments to vendors, partners, and affiliates at flat fees – $1 domestic, $5 international.
– transfer to your local bank account on-demand (and save on conversion costs).
– integrate with your existing systems via API, eliminating administrative labor.
Plus, you can still use all of your preferred payment channels, like Stripe, PayPal, ApplePay, Square, Amazon, and Shopify. There is no need to change your existing workflows – except maybe to schedule a little extra “me time” for yourself!
Sign up for the Remitr Global Business Account (GBA) today and get your international payments back in the black.