Five Hidden Costs of International Corporate Payments


To grow your business globally, mastering the fine art of international corporate payments isn't a luxury—it's a necessity.

Think of international payments as a “good news and bad news" scenario:

The Good News: The fact that you're making abundant payments means your company is likely thriving and generating revenues overseas.

The Not-So-Good News: The more international corporate payments you make, the more fees and costs you'll pay – and it's not always obvious what extra costs you're paying and why, even though those transaction costs continue to mount.

Job one is recognizing and rooting out the most onerous hidden international payments (both external and internal) and keep them from raiding your company's financial coffers.

Here are the worst hidden overseas transactions fees—and how to sidestep them:

1. Paying more for same-day transfers. 

It's no surprise that financial institutions charge a premium on same day overseas cash transfer payments. The surprise is how much they charge. To avoid waiting five days for an international transaction payment to clear, companies find themselves paying an extra 10% of the total transaction amount. But increasingly, digital payment providers are cutting those top-heavy same day transaction fees to as low as 2%. Your job? Make sure to know much extra you're paying for same day international payments.

2. Misleading exchange rates. 

Make sure to ask your financial institution what exchange rate they're using, and double-check to make sure it's accurate.

All too often, financial institutions may not be giving you the optimal foreign exchange (FX) rate when handling overseas corporate transactions. For example, a U.S. company engaged in an international payment transaction may think they're getting the mid-market exchange rate from their bank. Many times though, they're not, as financial institutions juggle FX rates to squeeze higher fees from unsuspecting companies, even charging them twice for the same transaction by producing misleading exchange rates.

Make sure to ask your financial institution what exchange rate they're using, and double-check to make sure it's accurate.

3. Payment timing.

In the foreign payment game, timing really is everything. Case in point: Timing is—and should be—tied to risk. One way to amplify that risk and pay more for overseas transaction costs is to pay late, which can add a premium to your transaction costs.

The solution? Pay early or at least at the time of shipment. Overseas companies will likely give preferential pricing to a customer who pays in advance or at the time of shipment. Work with your international corporate payment provider to create savvy and cost-effective solutions to managing payment timing risks, and take control of your payment pricing strategy.

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4. Not paying in local currencies. 

By and large, U.S. companies doing business in overseas bourses pay partners, suppliers, and customers in U.S. dollarsCompanies who do so may buy into the conventional wisdom that the U.S. dollar is preferred as a payment currency internationally. In reality, though, it is highly unlikely that the supplier actually holds a U.S. dollar account. Instead, the beneficiary of the payment will hold a local currency account (for example, MXN in Mexico, ZAR in South Africa, and EUR in Europe) and the dollars will be converted into the local currency before being deposited to the recipient's account.

Mitigate those risks and higher costs by offering to pay in the local currency instead of dollars.

Since receiving payment in dollars hikes business risks for overseas companies, businesses will often price those risks into product or service to cover their backs and, in the process, add to your transaction costs. Mitigate those risks and higher costs by offering to pay in the local currency instead of dollars. In doing so, your company relieves the other party of the risks and costs of receiving dollars and should be able to negotiate a better product price (a discount of up to 10% is common) as a result.

OANDA offers transparent and no-low fee options Corporate FX Payments options, you can request a quote here.

5. Not correcting paperwork mistakes.

This “hidden payment" falls into the self-inflicted mode. Sometimes, data processing input errors are made, like incorrect account numbers or mistaken financial institution details. While mistakes are largely unavoidable, what is avoidable is allowing the mistakes to go unresolved, as foreign currency rates work against you while you're trying to fix the problem (if you even know about the error). One fix in this scenario is to use auto-verification, available at most international payment providers, which double-checks data inputs against financial institution data and figures and alerts your payment department that a mistake was made, thus curbing the odds of losing money on a data input mistake.

Companies doing business overseas have enough on their plates without having to pay for hidden or avoidable costs when engaging in international corporate payment transactions. Keep a close eye out for the scenarios above and take the necessary steps to avoid them, and add more volume and value to your corporate bottom line in the process.

For transparent and no-fee corporate FX payments please request a quote below.