How to Solve the $800 Million Problem That's Stopping Small Businesses From Expanding Overseas

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Running a small business in America today is anything but a “small” feat. The challenges are enormous, from unpredictable supply chains to inflation to a maze of complicated regulations. But one challenge that is pushing many SMBs to the edge is probably one you wouldn’t expect: international payments.

Small businesses today are operating globally from day one. Today’s global marketplace, which has been transformed post-pandemic and with the continued rise of social media, means that the demand for and offering of goods and services is no longer constrained to one geographical place. And for any business, whether big or small, growing internationally can mean new customers, new suppliers and new opportunities.

However, many small business leaders are seeing their hopes of global expansion — and all the benefits that come with it — dashed by a range of macroeconomic and logistical challenges. These headwinds are massive, the biggest being the cost and complexity of international payments.

According to a recent survey commissioned by Wise, almost half (49%) of small business leaders agree that the complexity of international payments prevents them from expanding their operations abroad, while over one-third (31%) expressed that they would enter new markets if the costs of international payment were reduced. Inflation, taxes and regulatory barriers were also cited as key roadblocks to going global.

This hesitation to expand globally isn’t an exaggeration on the part of business owners. In 2023, small and medium-sized businesses (SMBs) in the U.S. lost almost $800 million to hidden fees on international payments — perhaps while sending money to suppliers in China or paying contractors in the U.K. In other words, $800 million worth of fees were concealed in marked-up exchange rates, so international payments were not only more expensive than they should have been, but also deceptive. At the end of the day, cash flow is king to small businesses, and they should be able to know exactly how much they’re paying and for what services.

It’s disappointing that hiding fees remains standard practice in international payments, but it’s also not surprising. This isn’t an issue you hear about every day, in part because it’s so difficult to spot the problem in the first place. And while there are efforts from consumer-focused regulators to prevent false advertising of “no fee” or “fee-free” services that conceal costs in a marked-up exchange rate, we are yet to see the same effort being made for small businesses. The glaring gap in advocacy for SMBs — and the gap in the existence of bespoke business-oriented regulatory bodies in general — not only hurts businesses financially but also undermines trust in financial services’ commitment to fairness and their supposed love of small business owners.

While there are plenty of problems to solve at the industry level, business owners do have the power to take matters into their own hands without waiting for providers to catch up on transparency. As someone working with small businesses day in and day out on their global financial needs, here are some top tips that help leaders overcome the challenges of expanding overseas:

Educate yourself: Take the time to understand the fine print of any financial service agreements. Be aware of potential hidden fees and how they can impact your bottom line. One easy way to do this is by comparing the exchange rate you see from your provider with the one listed on Google. If they don’t match, there’s likely a hidden exchange markup.
Choose transparent payment providers: With this knowledge front of mind, look for financial service providers that offer transparent pricing models. Avoid those that claim to be “fee-free” — they’re probably inflating costs through hidden fees in exchange rates.
Hedge against currency fluctuations and exchange rate risks: Expanding overseas means dealing with multiple currencies, which can expose your business to volatile exchange rates. To prevent such fluctuations from catching you off guard and significantly impacting your profit margins, look for providers offering auto-conversion services that convert your money automatically between two currencies once your desired rate hits. This makes managing your budget and cash flow more predictable.
Take the guesswork out of your supply chain: If you’re a small business sourcing or selling goods abroad, it’s no secret that international supply chains can come with delays, high shipping costs and complex trade regulations. Consider partnering with companies that specialize in international shipping and customs clearance. Having access to a convenient, transparent solution for tracking where your shipment is every step of the way — just as you would want to be able to see where your money is in real time — gives you peace of mind and allows you to get back to running your small business.

The $800 million lost by SMBs to opaque international payment fees is not just a number — it’s a barrier preventing growth and stifling innovation. But with the right tools and knowledge at hand, there are opportunities for businesses to overcome these challenges and achieve their goals for global operations.

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