The Hidden Costs of International Payments

In today's globalized world, international business transactions are commonplace for many French SMEs. However, beneath the apparent simplicity of international transfers often lie hidden costs that can significantly erode a company's margins. Understanding and optimizing international payment fees has therefore become a major strategic issue for companies engaged in cross-border trade.

The Unexpected Scope of Hidden Fees

A recent study by Capital Economics revealed an alarming figure: in 2023, French SMEs lost up to 658 million euros in hidden fees related to international payments. This colossal sum represents more than half (53%) of the total fees paid by these organizations to settle their foreign currency imports.

These fees, often concealed as markups on exchange rates, generally go unnoticed. Indeed, traditional financial providers may advertise attractive transaction fees while applying unfavorable exchange rates, creating a harmful opacity for businesses that do not always have the resources to analyze these costs in detail.

The Different Components of International Payment Fees

To better manage your international transactions, it is essential to understand the different components that make up international payment fees:

1. Explicit Transaction Fees

These are the fees clearly indicated by your provider for the execution of an international transfer. These costs can vary considerably from one institution to another, depending on:

• Fixed fees per transaction
• Percentage of the amount transferred
• Handling or processing fees

2. Margins on the Exchange Rate

This is often where the most significant hidden fees lie. The difference between the market exchange rate (the one you can see on Google, for example) and the one applied to your transaction can represent a margin of 2 to 5% of the total amount, without it being clearly indicated.

3. Fees from Intermediary Banks

In the traditional banking system, an international payment may pass through several institutions before reaching its final destination. Each intermediary generally charges fees, which are sometimes passed on to the sender of the transfer in an opaque way.

4. Receiving Fees

The recipient of the transfer may also be charged fees for receiving the funds, thus reducing the amount actually received.

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The Emergence of Fintech Solutions: A Revolution in Optimizing International Payment Fees

Faced with these opaque practices, new solutions have emerged to enable companies to significantly reduce their fees for each international payment. These alternatives to traditional banking circuits are based on several major innovations:

Digitalized and Centralized Platforms

Fintech companies specializing in international payments have developed fully digitalized platforms that allow you to manage all transactions from a single interface. This centralization offers better visibility on actual costs and facilitates the tracking of operations.

Reducing Intermediaries

By creating alternative payment networks, these new players bypass traditional banking circuits and their multiple intermediaries. This disintermediation significantly reduces transaction fees and speeds up processing times.

Tariff Transparency

Unlike traditional banks, these platforms generally display transparent fees and use the market exchange rate as a benchmark, thus limiting unpleasant surprises for businesses.

Instant and Local Payments

One of the major innovations lies in the ability to make instant payments via local payment routes. By using the domestic payment networks of the destination countries, these solutions not only reduce costs but also significantly speed up processing times, often to less than 24 hours.

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Concrete Strategies for Optimizing International Payment Fees

For SMEs concerned about controlling their costs, several strategies can be implemented:

1. Systematically Compare Exchange Rates

Before each transaction, compare the rate offered by your provider with the market rate (available on specialized sites or Google). This simple exercise will allow you to assess the margin applied and potentially negotiate better conditions.

2. Favor Multi-Currency Accounts

Opening accounts in the currencies of your main trading partners can considerably reduce your international payment fees. Multi-currency accounts allow you to:

• Receive payments in local currency without immediate conversion
•  Pay your suppliers in their currency without undergoing conversion
•  Choose the optimal time to convert your currencies according to rate fluctuations

3. Use Local Accounts

Some providers now offer to open local and multi-currency accounts in many countries without requiring a physical presence. This solution allows you to access domestic payment circuits and drastically reduce transaction fees and delays.

4. Centralize Your International Operations

Managing your transactions through a single platform gives you better visibility on your financial flows and facilitates the optimization of international payment fees. This centralization also simplifies accounting reconciliation and cash flow tracking.

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The Financial Impact of Properly Optimizing International Payment Fees

Effective management of your international payment fees can have a considerable impact on your company's profitability. For an SME carrying out 1 million euros of international transactions per year, if the hidden fees represent on average 3% of the total amount (i.e., 30,000 euros), their elimination thanks to more transparent solutions can generate significant savings.

Beyond the purely financial aspect, better control of these costs also allows you to:

• Improve the predictability of your cash flows
• Strengthen your relationships with your international partners thanks to faster and more reliable payments
• Gain a competitive advantage in markets where speed of execution is crucial

In a context where international transactions have become essential to the growth of companies, transparency and the optimization of international payment fees are no longer optional. New market players now offer credible alternatives to traditional banking circuits, offering SMEs tailored solutions to reduce their costs while improving the speed and reliability of their payments.

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By adopting a proactive approach to managing your international payment fees and exploring the innovative solutions available on the market, you have a real lever of competitiveness for your company.

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