7 Challenges Smaller Firms Face When Making Foreign Currency Payments

Irish SMEs see international trade as crucial for growth, but cross-border payments come with many challenges, including hidden fees, uncompetitive exchange rates, and complex processes. Overcoming these obstacles is vital for businesses to thrive globally.

Currency Conversion Costs

SMEs often receive poor exchange rates compared to larger firms. Banks typically mark up FX exchange rates significantly, shrinking profit margins. Lack of hedging services (e.g. FX Forwards) also expose SMEs to forex risks. Many SMEs underestimate these risks, leading to unexpected financial losses.

High Payment Processing Fees

Cross-border payments often carry high fees, such as international wire and currency conversion charges. For urgent transactions, some providers charge up to €50. These costs hit SMEs harder, especially those with thin margins, making low-cost payment options essential for competitiveness.

Lack of Dedicated Account Manager

Unlike in the past, many SMEs today do not have a dedicated account manager at their banks. This creates stress for finance teams when payment issues arise, as personalized support is harder to access. Studies show 46% of customers prefer human interaction in banking, highlighting the demand for better service.

Transaction Delays

Complex regulations and manual checks often cause delays in foreign currency payment processing. Incorrect details, like IBANs or SWIFT codes, can add days or weeks to transactions. Banking infrastructure differences between countries can also slow down processing times, disrupting operations. Not having a dedicated account manager to help resolve the issue can further add to the delays.

Regulatory Compliance

Navigating the regulatory environment for cross-border payments can be overwhelming for SMEs, which often lack the resources to handle compliance issues. Meeting anti-money laundering and other regulations adds complexity and increases operational costs.

Fraud and Security Risks

Cross-border transactions expose SMEs to security threats, such as phishing scams and fraudulent activities. In 2023, SMEs in Ireland lost €10 million to email-related fraud, with cases rising by 25%. Stronger fraud protection measures are essential to safeguard businesses.

Limited Access to Payment Options

In some markets, SMEs face restricted access to international payment methods. Without the ability to pay in local currencies (e.g. Chinese or Indian Currency), businesses risk losing out on more advantageous pricing, and potential global growth opportunities.

Addressing these challenges is key to SME success in global markets. By adopting transparent, innovative and cost-effective payment solutions, businesses can protect their bottom line and improve operational efficiency.

As part of our engagement with you we often get asked about Foreign Currency payments. In response to that, we are delighted to have partnered with Fexco for this piece. They’ll be one of the essential services with a special offer for SFA Members on our Member Advantage Area, to be added in the next couple of weeks, for more information on any of the SFA Member Exclusive Advantages, including the partnership with Fexco, please contact Naira Ludescher on 01 605 1776 or naira.ludescher@sfa.ie.