How to master international payments

For any small - or medium-sized enterprise, entering international markets is a double-edged sword.

With sufficient preparation, the potential upsides—including foreign suppliers and gaining overseas clients—are enormous.

Yet, for the unprepared business, there are potential pitfalls. “Dealing with multiple markets and currencies can be daunting,” says Tom Wood, HSBC’s Managing Director of Global Payments Solutions, Commercial Banking. “Sending money abroad is often expensive and slow, fluctuating exchange rates cause uncertainty, and local legislation can be hard to follow.”

These payments challenges are not insurmountable. Here, we speak to the founders of two small businesses scaling internationally: Tim Grimaldi, co-founder of CardMedic, and Wing Chan, co-founder of Sourceful. Both operate across multiple currencies, and both have lessons to share. Here are their top five...

The wrong payments strategy can waste a great deal of time

When Tim Grimaldi and his partner Rachel created CardMedic to help doctors communicate clearly with patients across language barriers, they knew they would want to expand beyond the UK. America was a priority market, so they decided to set up a local bank account there, not realising there were more efficient approaches. It was an arduous experience. “One of the founders has got to have a local presence, and although Rachel is a US citizen, you have to have a local address, company entity, and a US equivalent National Insurance number,” he says. The whole process took six months. “The international side of things was painful in the early days because we didn’t know how else to do it.”

Grimaldi has since realised that holding a single ‘multi-currency’ business account could have avoided the need to set up their American bank account in the first place. “That could have completely changed the game for us,” he says. “Because we could have had maybe one entity with insurance for the different countries, but otherwise trading as one.”

HSBC, for example, offers a multi-currency account called HSBC Global Wallet which can perform this function. It provides holders with local account details wherever they wish to transact, so they can receive and pay as if they held a bank account in that country.

There’s no substitute for local expertise

Wing Chan, co-founder and CEO of Sourceful, started the business in Manchester in June 2020 with his partner Sharon Chan, after noticing that companies were struggling to source reliable suppliers for their branded packaging. Since then, they have grown the team to more than 90 people spread across offices in Manchester, London, Amsterdam, and Shenzhen.

Chan says researching local legislation and regulations was essential. “Our model is to present locally to both brand clients and manufacturer suppliers, which could be in different countries, so we need to register entities in different markets,” he says. His advice? ‘‘Don’t cut corners: work with a local lawyer or accountant who can help you navigate the differences authoritatively’’.

The universe of startups trying to reduce friction in international payments is significant. “Stay alert to innovative services that can help you,” says Chan. For instance, there are apps that help businesses integrate a multiplicity of local payment methods into their stores. This is important because in some countries there are payment methods which don’t exist elsewhere—India, say, where a government mobile app has made real-time, bank-to-bank payments so mainstream as to rival cards. Another useful category of services is “payments orchestration” tools, which help businesses optimise costs associated with the backend infrastructure—the payments rails—that move money around the globe.

Employ traditional good practice

If you’re trading in multiple geographies, the risk that the exchange rate could move against you and erode your margin is not to be underestimated. Chan recommends “natural hedging where possible”, like buying and selling in local currency. There are other relatively straightforward methods to manage foreign exchange risk: if you are making a big order from a supplier, for instance, see if you can stagger payments over a period of time to average out fluctuations. Banks can advise on hedging strategies, and provide facilities such as forward exchange contracts to lock in fixed rates in advance of needing currency. In other words, smart practices don’t always have to involve shiny new tech.