Ten top tips for businesses making international payments

Carl Hasty, head trader with Smart Currency Exchange offers ten tips for businesses looking to make international payments.

Do your homework

There are now a wide range of options for making payments abroad. First and foremost, then, do your homework. Consider your requirements: do you need to make a few one-off payments? Or do you make regular payments to particular suppliers? For regular payments, a specialist foreign exchange (FX) supplier is the most cost effective option.

Look beyond banks

Banks were once the mainstream option for making international payments. However, technological and regulatory change has opened up the FX market. Many of the newer solutions compare favourably to banks – offering lower fees, more competitive exchange rates and better service.

Beware hidden charges

The two costs to consider when making payments abroad are fees and exchange rates. With some companies you need to be wary of hidden charges which can mask the true cost of a transaction. In terms of exchange rates, some providers might advertise ‘commission-free’ payments but then hike the exchange rate they offer. Look carefully at the small print whoever you use.

Ask about final costs

Look for transparency and openness from your FX provider. A reputable FX provider should happily tell you the final cost of your transaction after charges and exchange rates are taken into account, enabling you to make an informed decision.

In whose interests?

Our own FX traders are not paid commission – meaning they always have the client’s best interests at heart. This, for us, provides a safety net for the client, yet it is surprising given the scrutiny the financial services sector has been under of late that more firms don’t take our approach. Whichever FX supplier you choose, it is worth asking how their traders are paid.

Comparing rates

The UK has the most crowded FX brokering market in the EU. But how do you compare the exchange rates of various brokers? A number of useful comparison websites have set up to help with this - www.fxcompared.com is clear and easy to use.

Don’t forget security

Ensure your FX company is FSA authorised. Also satisfy yourself you are dealing with a reputable player. Ask for testimonials and find out how long the company has been in operation. Currency exchange businesses don’t have to be authorised by the FSA unless they are trading more than three million euros a month – meaning if there is a problem, you won’t be guaranteed full protection.

Service is key

We believe your FX and international payments provider should be doing more for you than simply providing competitive rates. They should work with your business to understand its goals and keep it up to date with events in FX markets – by doing so, your business could save thousands of pounds each year.

Timing is everything

We always inform clients when the exchange rate for the currency they are transacting in appears good – and offer them the choice to ‘buy in’ currency for future payments using a forward contract. Businesses save a fortune by getting the timing right; again, this is something a quality currency partner should help with.

Be careful!

FX markets are volatile right now, reflecting uncertainty in the global economy. Ask your FX supplier about hedging techniques which can help protect against wild fluctuations in exchange rates. They should be ready to explain about the principles of hedging – and how they apply to your business requirements - in a clear and easy to understand manner.

For more information about FX, please see www.smartcurrencybusiness.com and download our free Outlook. Alternatively call us to discuss your requirements on +44 (0)207 898 0500.

Spain’s euro woes highlight wider opportunities for UK importers

From a financial and economic perspective, these are interesting, difficult times for Spain. I’ve mentioned in previous articles about the danger that the markets might begin to pick off weaker Euro zone countries one by one, and such a scenario appears to playing out.

Spain’s banks are now in the process of being bailed out by the European Financial Stabilisation Mechanism (EFSM) which comes as no surprise to those who saw how recklessly Spain’s banking sector behaved when buying into the Spanish property boom. Where this will end is anybody’s guess given that, firstly, the property market represents an alarming percentage of Spain’s GDP and, secondly, the current bailouts assume no further deterioration in the value of the existing loans on Spanish bank books. If asset – property - prices keep falling, one would assume more support will be needed to prevent the banks becoming insolvent.

Concerns about Spain are reflected in Spanish 10-Year government bond yields which have been knocking on the door of seven per cent of late. So how is all of this impacting on the value of the euro which, in turn, affects costs for those importing products from Spain and the rest of the Euro zone?

In relative terms, Spanish products have actually been getting less expensive for UK importers. For the past month, UK sterling v the euro has hovered around the 1.24 to 1.25 mark, the euro having weakened considerably during 2012. This is a good time to be importing from the Euro zone, for sure.

Even so, it’s still vital to have a currency strategy in place as the recent bailout of Spain won’t be the end of matters where the Euro zone crisis is concerned. Austria's finance minister Maria Fekter recently said that Italy might also require financial help soon due to its high borrowing costs. She also added that Euro zone rescue funds, which have been stretched by supporting Greece, Portugal, Ireland and Spain, could be insufficient to cope with Italy as well.

In theory, this, the dreaded ‘contagion’ scenario, should send the euro tanking even further against supposed safer havens such as UK sterling and the US dollar. But the reason for a currency strategy is this: where currencies are concerned, there are no sure-fire safe havens right now. Consider this: at the same time as Spanish banks are being bailed out, the Congressional Budget Office (CBO) in the US has recently issued its annual long-term budget outlook report. The 2012 numbers see the CBO estimate that US federal debt will rise to 70 per cent of GDP by the end of the year. This is the highest percentage since World War II. So, while the euro might not look very attractive right now, you wouldn’t want to be putting too much faith in the US dollar either.

The message in all of this is simple: hedge your bets as further currency volatility is inevitable. Snap up some euros around that aforementioned 1.25 mark and purchase Spanish products at what will be, for UK importers, the most competitive prices for more than three years. But build in some scope for further euro purchases later in the year. All other things being equal, we’d expect the euro to deteriorate even further.

At Smart Currency Exchange, we update our views on the euro/sterling exchange rate on a daily basis. We also produce on a monthly basis our “Outlook” report which pulls together our thoughts and those of the mainstream banks on where to next for exchange rates. Download your copy now at www.SmartCurrencyBusiness.com or call us on 0845 638 0571 (or +44 (0)207 898 0541) to discuss your situation.

Think Smart, Act Globally

Having a global outlook is a vital attribute for business leaders argues Carl Hasty, Head of Trading with Smart Currency Exchange.

The issue of management and leadership – a subject which, I think we would all agree, is critical to the fortunes of the national economy - often comes down to the question of what makes a good leader. For my own part, I firmly believe one of the most important attributes for business leaders of the future will be the ability to think globally.

Now, you don’t need to be Einstein to figure out why I should draw such a conclusion. Figures from earlier in spring showed that the UK had once again slipped back into recession. Indeed, since mid-2008 the UK has had seven quarters of GDP growth – compared with nine quarters of GDP contraction.

On the face of it, then, these are worrying times, particularly given ongoing unrest in the Eurozone. And yet, there is a world of opportunity out there. At Smart Currency we work with hundreds of exporters who see the world – not the UK – as their market. They think in global terms and their leaders and management teams have a global vision.

So is now a good time to export? In my opinion, there’s never a bad time to be exporting. Question - what do the following countries have in common: China, Qatar, India, Iraq, Estonia, Turkey, Saudi Arabia, Indonesia, Hong Kong and Singapore? The answer is that these are just a few of the 70-plus countries whose GDP growth rate exceeded 5 per cent in 2011.

Clearly, the global market offers opportunities for firms around the world. My overriding point here is that it is easy to get caught up with the doom and gloom engulfing the UK economy and, in the process, lose sight of the fact that many parts of the world are developing fast in all manner of business sectors.

Currency strategy

While I am all for thinking globally, I would add that any business embarking on an international strategy right now needs to have a currency strategy in place. The uncertainty of the global economy has led to volatile exchange rates in recent times. Sterling has moved markedly against the euro and US dollar of late. For exporters without a currency strategy, movements in sterling’s relative value will prove costly.

At Smart, we can help your business develop a robust currency strategy in order to negate the currency fluctuation risks associated with international trade. Smart adopts a range of techniques such as forward and spot contracts to provide stability to those engaged in international trade. We also help exporters to maximise margins by offering significantly better-than-bank currency exchange rates.

We expect more currency swings in the next few months as the Groundhog Day scenario that is the Eurozone crisis rumbles on. By partnering with Smart you won’t need to worry about currency movements and their impact on your foreign contracts, and can instead focus on developing your business beyond the shores of the UK.

To ensure you’re getting the best information on FX, get a risk strategy in place. Smart Currency Exchange can help you do this in one phone call. Call us now on 020 7898 0500 or visit our site at www.SmartCurrencyBusiness.com

Casa Mining strike gold with Smart

Casa Mining are a leading mineral exploration company controlling large-scale projects in the Democratic Republic of Congo and Mozambique. Their primary activity involves scouting out areas to conduct exploration programmes in search of gold and other valuable minerals.

With suppliers and employees spread across Europe and Africa, Casa Mining are constantly dealing with transactions in a number of currencies including euros, sterling, Canadian dollars and South African rand.

Having grown concerned over the poor exchange rates offered by their bank, Financial Director Eoin O'Driscoll was urged to check out Smart Currency Exchange. The difference he discovered was startling. “Smart conducted an analysis of the rates that we were getting through our bank and compared it against what we would be getting if we were using them. I had never imagined we could make such a big saving. I now regularly perform comparisons and Smart's rates are consistently the best”.

As well as the competitive rates offered by Smart, it was the ease with which each transaction was made that appealed to Eoin: “Being able to deal with our transactions over email and on the phone has freed up valuable time to concentrate on other areas of the business. The main draw of Smart is the rates, but the fact that it makes our life so much easier is a fantastic added bonus”.

Eoin went on to explain how the personal service offered by Smart Trader, Siobhain Barry improved the service: “Siobhain's service has always been exemplary. Having one broker assigned to you removes any of the apprehension that you feel when transferring large sums of money. Having a face to put to the company, rather than just a website or a call centre, helps a great deal and gives you complete confidence when doing business”.

When asked to sum up Casa Mining's dealings with Smart, Eoin was happy to elaborate: “The service received is fast, efficient and pain free but by far the most important factor for us is the significantly better rates that we are offered. These don't just make a small difference to our business, they save us real money. On a typical year they save us between £20,000 – £25,000”.

It is clear that managing your foreign currency exposure effectively is a vital requirement of any business that deals internationally. For more information and to see how Smart Currency Exchange can save you money, get in touch with the team on 0207 898 0503.

Focus on South Africa

I thought it would be worth looking at the South African Rand (ZAR), in terms of its performance as a currency in recent times and prospects for the future.

Economically, South Africa is a mixed bag. With an abundance of natural resources, the country is a major commodities exporter; its economy has opened up dramatically in recent times. And yet it still faces huge social and structural issues. Moreover, it has not been immune to the global economic downturn. China is a major resources importer and its slowdown has hit South African exports. The IMF recently said that if downside risks to global economic growth materialise, there will be greater challenges facing commodity exporters such as South Africa.

That said, economic data released since February has been positive. Economic growth forecasts for South Africa in 2012 vary. South African Reserve Bank recently upped its own GDP growth forecasts for 2012 to 3 per cent.

In the past 12 months the ZAR/GBP rate peaked at 13.31 while hitting a low of 10.67. Our forecasts for the rate are as follows: 3 months 12.37; 6 months 12.24; and 12 months 12.68.

If you want to ensure your bottom line is protected, call us now and we’ll help you put together a risk strategy.  Alternatively, you  find out more about the rate forecasts in our monthly Outlook. 

Business blooms for Beautiful Bottoms

Beautiful Bottoms was established by Poppy Sexton-Wainwright and Lauren Skerritt back in 2009 after they met as business students at Newcastle University. As soon as they concluded their studies, Poppy and Lauren were able to focus their attentions onto their company, which offers beautiful silk lingerie at affordable prices. Two and a half years later, they are still going strong.

Beautiful Bottoms products are designed in London and produced by suppliers in China who then invoice for their services in dollars. With numerous lucrative transactions under way, it became a company priority to find the best FX rates around.

Naturally, their first step was to utilise the service provided by their bank, but after their initial transactions Poppy and Lauren became unhappy with the service they were receiving and voiced their concerns to a friend. He recommended they contact Smart Currency Exchange. Poppy explained: “Our bank just didn't make us feel like our business was important to them every transaction was marred with hassle - and that's even before we mention their extortionate rates”.

Having just finished designing their latest collection their energies are now focused on connecting with their customers via social media and jetting off around the world to visit  trade fairs in Paris and New York. Being so busy, it is the simplicity and efficiency of Smart's service which really appeals to Beautiful Bottoms. Poppy elaborated:
“Everything is just so much easier with Smart. With just an email I can book in transfers to clients and suppliers – it is so simple”.

Poppy went on to compliment the personal service offered by Smart Trader, Alex Bennett and the team: ”Alex and all of the other traders that I have dealt with at Smart are always happy to advise on current FX rates and do all that they can to make it a simple and pleasant experience, with very little hassle”.

When asked whether they would ever be tempted to use another FX supplier, Poppy answered: “I have friends who work in FX trading, so I am clued up on the rates of the day. Smart give us a highly competitive rate and I very much doubt that anyone could beat that”.

The message is clear. Managing your foreign currency exposure effectively is a vital requirement for any business that deals internationally. For more information, get in touch with the team at Smart Currency Exchange on 0207 898 0503 alternatively visit our website at www.smartcurrencybusiness.com.

Stabilise your international trade as the Eurozone unravels

Following a period of relative calm at the beginning of the year, there are ominous signs that the situation in the Eurozone may be starting to unravel. First, France elected a new left wing president - Francois Hollande – who immediately told supporters that his victory gave hope of an “end to austerity”. Then the leader of Greece's left-wing Syriza bloc said he would try to form a coalition-based government which would renege on the terms of the recent EU/IMF bailout deal. Alexis Tsipras, whose bloc came second in the Greek election, said Greek voters had “clearly nullified the loan agreement.”

This is significant news for the euro and, indeed, anybody involved in import and export to the Eurozone. The reason is that it once again raises fears that we may soon witness a partial or complete break-up of the Eurozone. How likely is that? Well, it’s quite telling that bookmakers Paddy Power – who are no fools – go as short as 6-4 that Greece will be using Drachmas by 1 December 2012.

Given this precarious position, it was no surprise that sterling hit a 3.5-year high against the euro of 1.2440 in the wake of the general election results in Greece and France.

But the broader message is one I’ve spelt out before: volatility in currency markets will be the norm for the foreseeable future. Some kind of currency strategy is an absolute must-have for businesses dealing in international trade.

There’s no doubt the 1.2440 figure above looks hugely tempting. In the last issue I wrote that 3-month GBP expectations against the euro were at 1.23, moving to 1.25 on a 12-month scale. At the time of writing, I would revise those figures upwards to 1.27 (3-months) and 1.32 (12-months).

However, I would strongly advise use of a hedging strategy because the Eurozone crisis is a fluid situation. Buyers from the Eurozone could use a hedge to ‘lock-in’ that 1.24 rate – which is excellent by the standards of recent years – while leaving some scope to purchase further euros later in the year.

The reason for this is that while the situation in the Eurozone doesn’t look healthy at the moment and points to a further deterioration of the euro, things can change quickly – and recent history suggests they probably will. Remember, the UK economy itself is in recession. Moreover, the UK Coalition of the Conservatives and the Liberal Democrats is on shaky ground right now, especially after the hammering both parties took at the recent local elections. Tellingly, commentators on both left and right of the political spectrum are increasingly questioning the Coalition’s austerity measures. Yet any change in tack would likely see the markets hammer sterling.

These are, need I say it, uncertain times; a robust currency strategy for any business engaged in international trade is more important than ever. Find out how your business can avoid market volatility by emailing us, or calling us on 020 7898 0500 – you can also visit our website at www.smartcurrencybusiness.com