Understanding Ecommerce Foreign Currency Solutions
If you want to be a global e-commerce Amazon, Shopify, WooCommerce or Ebay seller you’re going to need to make sure you have a solid system in place to take care of your payments or these platforms will literally steal your profits!
If you leave your payments to the mercy of the conversion rates provided by the different e-commerce platforms THEY WILL SCREW YOU!
Platforms like Amazon often offer conversion rates of up to 5% lower than the actual market exchange rates.
When you’re just starting out, you can probably ignore this, but at some point, when you begin to scale this is going to start costing you some serious money!
Think that 5% is not much? 5% on £1,000 is £50 lost.
When you start doing daily disbursements of £1,000 a day that will easily cost you £350 pounds a week! Multiply that by 52 weeks a year… YIKES!
So what’s the answer? Before we go to the solution, lets first look at the options available:
The Four Options:
In the case of selling on Amazon, I’d firstly recommend that you check to see if Amazon even support direct transfer to your bank account.
Generally speaking, if you are a seller in the Eurozone, US, UK, Australia, New Zealand, India, Hong Kong or Canada, Amazon supports payouts directly into bank accounts in your countries.
Sellers should note that Amazon only makes disbursements in the home currency of the country where your bank account is located.
For example, If you open an USD bank account located in the UK any US disbursements from Amazon.com would only be able to be made in GBP as this is the local currency of the UK. EVEN if your bank account is capable of accepting deposits in both GBP and USD currencies.
This means Amazon will automatically convert your USD payments to GBP and then your payments would be converted back to USD causing you to incur hefty foreign currency transaction fees.
If the above is not an option, or you are worried about conversion costs then this leaves you with four main options.
Open a local bank account in the foreign country you wish to sell.
The easiest way to do this is to incorporate a US/UK/Euro company and then open a bank account in that country, of the four options, this would probably be the most expensive and also potentially require you to file tax returns in that country and maybe a host of complications such as hiring an accountant.
Which could be a lot of drama just for a bank account!
However, this is definitely something to consider if tax rates are lower in the country you are selling compared to your local jurisdiction.
The other three main options are the use of currency conversion sites:
In general, the way these sites tend to work is that you fill out the forms on their website, submit your identity documents and then wait for your account to be approved.
Once this has been approved you will then need to submit to Amazon or whichever platform you’re selling on documentation to verify your new currency account.
Once this occurs each of the respective services tend to give you a foreign currency denominated account.
A great advantage of using Payoneer over Worldfirst and Currencies Direct is that they provide you with a debit card.
This can be especially handy as they provide you with a USD debit card that allows you to make purchases with.
For example, if you are based outside of the US you could make inventory purchases with US retailers.
As Payoneer is transacted in USD you would receive payouts in USD and use that same USD to pay for inventory purchases in USD which would help you avoid two foreign currency transactions.
Compare this to the scenario say where you live in the UK and you didn’t use a foreign currency service your money would be converted from USD to your home currency which would be one fee and then you’d make a purchase in USD using your home currency which would be another fee.
As you can imagine being able to make payments with a Payoneer card can really save you on foreign currency transaction costs.
If you use my affiliate link when you sign we both get $25 credited towards our accounts. Otherwise use the links below to get more information:
➤ To learn more about integrating Payoneer with your Amazon.com seller account click here.
➤ To learn more about Payoneer integration with your Amazon.co.uk click here.
➤ To find out more about the fees associated with using Payoneer click here.
Currencies Direct & World First
These two companies specialise specifically in low-cost foreign currency transactions and like Payoneer tend to offer bank accounts in all the major currencies i.e. British Pounds, European Euro, Chinese China CNY, Canadian Dollars, US Dollars and Japanese Yen.
They tend to offer better foreign exchange rates and lower foreign exchange costs relative to Payoneer.
The other major difference is that unlike Payoneer World first and Currencies direct do not offer a debit card service. To find out more about the respective fees for World first click here and Currencies direct click here.
Now you’re probably wondering which service I recommend?
When running a business I feel it is wise to have multiple options in case something goes wrong.
Therefore, I would probably suggest using Payoneer for it’s debit card feature and then either Currencies direct, or World first as a method to transfer and receive foreign currency as you never want your business to be completely dependent on any one system if possible.
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