For Australian businesses expanding to global markets through ecommerce, ‘hidden’ conversion fees with payment gateways when processing supplier invoices can be an unforeseen challenge.
However, managing director of premium online maternity lingerie and clothing store, Cake Maternity, Keith Hyams has shared an FX hack that’s helped him save $20,000 a year.
Cake Maternity is the go-to platform for mums and their essential nursing wear in many countries including Australia, Canada, UK and the US, so the business is constantly trading in multiple currencies, and often works with payment gateways like PayPal.
Bypassing unnecessary payment gateway fees became increasingly important as online sales volumes increased seven-fold in the past year alone. By opening an OFX Global Currency Account, Hyams was able to bypass the potential for marketplaces and payment gateways to double dip in currency conversion and merchant fees, while successfully navigating some of the challenges when dealing with foreign bank systems.
It became evident early on that Cake Maternity wasn’t going to successfully compete in the overseas markets, should it not localise its offering, according to Hyams.
“From a localised currency offering, localised comparable pricing, regional support, a competitive delivery timeframe, comparable delivery cost, local returns and exchange handling, as well as an excellent customer service team, were some of key hurdles we had to overcome and put in place to truly expand in the European, US and Canadian markets,” he said.
“One of the most challenging pieces behind a global sales and distribution strategy is the handling and flow of funds, without losing significant margin due to currency transfers. OFX has been instrumental in connecting and assisting with the flow of funds from various regions and their localised banking solutions.”
To help safeguard his profits, Hyams implemented a series of FX strategies including paying local suppliers in local currency where possible; locking in transfer rates when favourable; paying foreign suppliers from localised bank accounts, where currency is the same, and asking for better transfer FX rates especially for larger amount transfers.
“The traditional banks aren’t necessarily proactive with currency handling or transfer advice, especially for the small to medium size businesses. Their solutions tend to be more traditional and expensive. We’ve found FX specialists to work off smaller margins, demonstrated a more vested interest in our success and have been super helpful,” he added.
OFX director of strategic partnerships, Ed Wiley (feature image) believes it’s important for ecommerce businesses expanding overseas to understand how to make currency volatility work in their favour. For example, implementing a Forward Contract to fix exchange rates for up to 12 months to help provide currency certainty needed to price products and services.
“Many ecommerce platforms will only pay you in US dollars if you have a domestic US account. Without this, online sellers run the risk of having US sales automatically converted to AUD using a marketplace platform’s own exchange rates. Banks can charge up to 4% in conversion fees each way, so it’s possible for an Australian ecommerce business to be hit with a double whammy of conversion fees. There are multi-currency accounts such as an OFX Global Currency Account that can plug and play into global marketplaces and payment gateways to help businesses sidestep these fees.
“For businesses like Cake Maternity that are accepting payments in multiple currencies, leveraging various payment gateways can help to reap the benefits locally but can be tricky to juggle without a strong FX strategy. Having an overarching FX strategy is essential to helping protect profit margins and ensuring unnecessary fees aren’t eating away at your bottom line.”