In Search of the Best Small Business Global Payment Option
September 6, 2017
At Veem, we aim to be the best small business global payment option. We’ve pioneered a new user-focused global payment method that removes middlemen and hidden fees, saving you time, money, and headaches. Our next-generation platform enables simple payments worldwide, making you free to focus on building your business instead of wasting time tracking down funds or navigating through a complex payment process.
In today’s global marketplace, it’s more important than ever that a good small business global payment option is included in the money tools you choose. Gone are the days when distance or anything else limited your choice of suppliers and employees or the ability of anyone in the world to discover you and become a customer. The internet lets you buy from a source that’s located anywhere in the world, and someone from thousands of miles away can purchase goods or services from you. Talent from anywhere can apply for job openings you post on your website. Your small business money management tools must include a way to exchange funds with suppliers, customers, and staff anywhere in the world in order for you to take advantage of the limitless possibilities of the global market.
A variety of small business global payment options are available, most of which have their strong points and their weak points. When considering the options and deciding which is the best choice for your small business, you need to evaluate the cost, convenience, and risk of each alternative. It’s a decision not to be taken lightly as the wrong decision can lead to headaches, lost productivity, and damaged business relationships.
Cost can vary widely from one small business global payment option to another. Traditional bank-to-bank transfers include multiple fees by multiple players in the process, making it probably the most expensive alternative. This is especially true if you have a large number of small payments on a regular basis. For example, maybe you employ a large number of developers who are located all over the world. Many are part-time, a decision you made in an effort to reduce some overhead costs. Imagine, however, what happens when it’s payday for those developers. Although you may have managed to keep wages and associated overhead low, if you’re paying multiple fees on every one of those fund transfers, any savings you hoped to have can easily be wiped out and exceeded by the cost of just paying your employees.
Another consideration in choosing a small business global payment option is its reliability. In every business relationship, reliability is crucial. To build and maintain a good relationship with suppliers and employees, you must establish trust with them. An essential part of building that trust is timely payments. The future of your relationship with your best supplier will be in serious jeopardy if they can’t rely on timely payments from you, and an employee who has issues every payday may quit and find other employment.
One of the drawbacks of traditional money transfers, especially when done globally, is the complexity of the process. This complexity results in payments that can take a week to reach their destination. It also means that if the transaction doesn’t reach its destination for some reason, it’s tough to figure out what went wrong and where it went wrong. As a small business owner, you don’t have time to waste on cumbersome back-end processes. You need a global payment solution that is simple, quick, cost-effective, and traceable so you can focus on your core competencies.
Traditionally, companies have relied on the complex and confusing process used by commercial banks to send funds globally. The reality, however, is that your bank is just starting the process for you and charging you a fee to do it. You don't see the chain of people who actually conduct the transfer.
The process for completing non-cash transactions between banks involves a network of individuals and entities. It doesn’t matter if your funds are traveling to another state or another country, the players are essentially the same. It’s a process that, believe it or not, hasn’t changed much for decades. It’s still very much like it was back when people wrote lots of checks. The payment you initiate in the U.S. to send to Britain, for example, passes through many hands along the way, and each set of hands wants to profit from their contribution to helping your global transfer along its way. They can quickly add up to a hefty sum. Here’s how your money gets from you to its international destination.
ACH (Automated Clearing House)
At one time, banks literally carried checks they received from another institution to that institution for processing. To illustrate, consider when Mom and Dad used to send you checks when you were in college. Your accounts are at the student credit union, and Mom and Dad’s accounts are at ABC bank. Before the widespread use of ACHs, when you took Mom and Dad’s check to your credit union, they would take that check to ABC bank for processing and then put the money in your credit union account. This was a time-consuming and costly process for banks, and they concluded that they’d prefer to take all of their checks to one institution who would do the work of distributing them to appropriate places. These were the first clearing houses.
As the digital age grew, so did the the clearing house industry, leading to the 1974 creation of Automated Clearing Houses (ACH). You’ve likely seen ACH on your bank statements. The growth of ACH transactions has skyrocketed in the last 30 years. In 1988, ACH payments were about a billion dollars. In 2016, that number had exploded to 25 billion. Going back to our college example, an Automated Clearing House acts as the middleman between your student credit union and Mom and Dad’s bank. Instead of physically sending checks to multiple banks for processing, your student credit union today would send all of their checks to an ACH, who would complete the distribution of those checks for your credit union. They don’t do this for free, of course. All ACH transactions are handled either by the Federal Reserve Bank or by a private company who is regulated by the Federal Reserve Bank.
If you are sending money globally, the only difference is that instead of those funds going through an ACH, they are probably going through CHIPS (Clearing House Interbank Payments System), the international clearing house. CHIPS is responsible for 95% of all transactions that cross the American border and has seen rapid growth as well, and now settles over $1.5 trillion in transactions a day. And yes, they have a fee.
SWIFT (Society for Worldwide Interbank Financial Telecommunication)
Many people who have sent money internationally have heard of SWIFT and believe that they are basically a clearing house. The fact of the matter is that SWIFT doesn’t handle money at all. They are another middle man between you and the recipient. Their function is to transmit messages between banks, facilitating the movement of funds, and your bank will likely include a SWIFT fee in what it charges you for a transfer.
The next link in the chain is currency exchange. Exactly when it happens varies from one bank to another. Sometimes it takes place when you initiate the global payment, and sometimes it doesn’t occur until it reaches the recipient. Regardless of where and when it happens, there will be a fee for currency exchange. It will be paid either by you when you initiate the payment or by the recipient when they collect the funds. And one more fee – your recipient’s bank will probably charge them a fee just to collect your payment. Total fees can reach $60 for the sender and another $60 for the recipient, and that’s before currency exchange fees.
If the process goes smoothly, the time it takes for your global payment to go from your bank, through SWIFT and CHIPS, then through currency exchange, and finally to your recipient is about three to five days. If all does not go well, who knows. It’s a mess.
Because there are so many people involved in this process, it’s challenging to pinpoint exactly where the failure happened. Of course, no one wants to take responsibility so here is what will likely happen. After three to five days, your angry supplier or employee will contact you and say that they have not received your payment. You apologize, tell them when you sent it, and advise them that you will contact your bank immediately to find out what went wrong.
Confident that your bank will be able to see where your payment is and identify the reason for its delay, you call them, and are shocked when they tell you that they can’t tell where it is or identify the reason for its delay because they aren’t able to track a payment. This is when you learn that all they do is start the process and your heart starts pounding. While your mind is spinning and you’re panicking because the longer this takes, the more damaged your relationship with your supplier or employee becomes, your bank offers to contact SWIFT for you. You breathe a sigh of relief.
After waiting several hours and not hearing from your bank, you call them for an update. They give you the unfortunate news that they haven’t been able to reach anyone at SWIFT yet, but they assure you that they will keep on trying. And they do. They try and try and try. Your blood pressure rises with every minute that passes without a resolution. You can’t focus on work. You’re getting nothing done except wearing a groove in the floor from your pacing. So you call the bank only to find out that they still haven’t had any luck with SWIFT. Out of options, they tell you that they will contact the receiving bank and ask them to call SWIFT in hopes that they may have better luck. It sounds like a good idea, so you are cautiously optimistic.
Unfortunately, the receiving bank has the same experience with SWIFT that your bank had. They try and try to reach someone who can help but have no luck. In a fury and having no way to find out what happened to the transaction that you paid all those fees on, you cancel the transaction and initiate another one. All the while you pray that the new one goes through. Because you can’t recall your money, you also pray that you don’t end up with a duplicate payment when the first one eventually appears at your supplier or employee’s bank too. Multiple apologies to your supplier or employee ensue as do weeks of work to rebuild trust and repair the damaged relationship.
If you have the unfortunate luck of having to deal with a failed global payment, you’ll quickly learn that when things go wrong, the process is fraught with a lack of accountability. No one will confirm that the transaction went wrong while it was in their hands. As a business owner, you believe in constant improvement and are always trying to identify lessons learned from good experiences and bad. You apply those lessons to future experiences so you can do things better and more efficiently. What lesson is to be learned from this experience? How can you learn how to do it better next time if no one can even tell you what went wrong? You can’t.
The lesson you may learn from this experience is that you need to find another way to send global payments, but what are the payment options for small business? When it comes to conducting business internationally, what are the payment solutions for small businesses? You need a low-risk, convenient solution. Veem offers both. Here’s how we stack up against the other three main options.
Wire/bank transfer – Low convenience/Medium risk
This is the process we illustrated above, except we didn’t tell you all of the information you have to provide to even initiate the payment. Here’s a list.
- the SWIFT code for your recipient’s bank
- the routing number for your recipient’s bank
- the address of your recipient’s bank
- your recipient’s name
- your recipient’s address
- your recipient’s account number
We also didn’t mention that most banks require that wire transfers be initiated in person. So every time you want to wire money overseas, you have to schedule around the bank’s hours, which include a cut-off time for transfers. If something comes up and you can’t manage to get there before the cut-off time, they won’t send your global payment until the following day. That’s not a message you want to deliver to your supplier or employee.
If you happen to live in a small town or bank at a local bank or a branch not located in a major city like New York or San Francisco, you will likely find that employees don’t have a good understanding of how the wire process works, and they may fumble through it with you. As previously mentioned, they will charge you a fee to initiate the transfer and, depending on when the currency exchange happens, may charge you a foreign exchange fee as well. Although wire transfers take an average of three to five days to complete, this isn’t a guarantee. It’s an average, which means that it may take longer. No one can tell you the exact number of days it will take, which leaves you and your recipient anxious and not knowing when to even suspect something may have gone wrong. And if something does go wrong? There’s no getting your money back. All this makes the use of bank-to-bank transfers for global small business payment processing far less than ideal.
Western Union – High Convenience/High Risk
One advantage that Western Union has over bank-to-bank transfers is that they can confirm receipt of the funds, increasing its level of convenience. However, they don’t allow you to recall your money if the transaction doesn’t go through unless the recipient is a fraudulent one.
Paypal – Medium Convenience/Medium Risk
Paypal is one of the largest internet payment companies in the world and was one of the pioneers of electronic fund transfers. Their process is simple, requiring only email addresses for both the sender and the recipient. They also have an in-house system that uses artificial intelligence to identify transactions that may be fraudulent. If you don’t verify your account with either a credit card or a balance, Paypal imposes a limit on the amount of funds you can transfer. Paypal has two significant downsides. The first is that the sender is not able to confirm receipt of funds without reaching out to the recipient. The second is foreign exchange rates that are not competitive with other global payment options.
So how does Veem compare?
- Like Paypal, we offer low-cost online payments for small businesses and require only email addresses for the sender and the recipient.
- Our online platform is user-friendly and intuitive.
- We don’t impose hidden fees or other costs.
- We provide a tracking service that lets the sender see when their funds have been claimed. The ability to confirm receipt without having to contact the recipient minimizes the risk of sending a second, unnecessary payment.
- To prevent fraud, Veem verifies the sender’s business partners by confirming bank information and verifying that they have passed all regulatory compliance requirements, eliminating risk for your small business before a transaction even begins.
Veem wants to remove your concerns about sending global payments. As a small business owner, other things require your focus. Outgoing payments, whether domestic or international, should not be a source of anxiety. They should be seamless and worry-free. As a small business owner, one of the things that does require your focus is costs. Finding ways to do things at a lower cost without sacrificing quality of either your product or your service is an ongoing effort that extends to your payment processes. You also know that nothing goes perfectly 100% of the time, but when something does go wrong with a transaction, you want to be able to trace it and figure out why it went wrong. Veem addresses all of these issues.
Our easy process takes just minutes and doesn’t require all the information you would have to supply for a bank-to-bank process. It’s as simple as this.
- Set up your profile – Just provide your name, business, and email address and link to your bank account.
- Tell us how much you want to send and in what denomination. We can send to 60 countries, and we don’t charge a fee. We just need an email address for the recipient.
- The recipient will need to confirm their bank details and and business information the first time we send them a wire transfer from you.
Once your profile and your recipient’s profile are created and linked to your respective bank accounts, and the first transaction is completed, future transactions are just a click away. Your payment will reach its recipient in one to three days. Our platform also eliminates worries about the delivery of your transaction by allowing you to track it from beginning to end, just like you would track a package delivery. Is your payment going to a new supplier? No worries. Before your money begins its journey across the world, we verify the recipient’s identity and regulatory compliance status.
Veem was founded in response to the inefficiencies of global payment processes and the problems we saw them causing for small businesses. We eliminate those inefficiencies and the worry that they bring to small business owners so you can focus on growth and innovation. Time spent trying to diagnose and remedy failed global payments or a failure in any other process is time wasted, time you could have spent building your business. Efforts like this hurt productivity and other aspects of your business. By removing the middlemen and owning the global payment process from end to end, we free you up to focus on driving your business into the future.