Traditional banks have a stranglehold of 95 per cent of the business payments market, according to a study by Covercy.
One company making 20 transactions of £30,000 could overpay an average of £4,400 monthly or £52,800 a year in completely unnecessary fees, the survey finds.
For a company making 20 transactions of £10,000 this equates to £2,120 a month or £25,440 a year, and for a firm conducting 20 transactions of £1,000 this will total £1,100 a month or £13,200 a year.
Meanwhile, importers have also been hit with unprecedented slides in the value of sterling due to Brexit (16 per cent year on year against the dollar; £1/$1.31 and 18 per cent year on year against the euro; £1/€1.18), while also facing these needless cross-border fees.
With more than two thirds (69 per cent) of the UK’s 53,000 SME exporters making at least 20 transactions a month, paying over the odds for these transactions can really add up, according to Covercy CEO Doron Cohen.
He says that Brexit has brought huge uncertainty to UK SMEs, with 96 per cent of exporters selling to the European Union. And now, with the threat of being locked out of the single market, these exporters potentially face new, costly taxes which could make them much less competitive than their EU rivals.
‘Meanwhile, SME importers have already suffered a critical 18 per cent rise in their costs in less than a year due to the fluctuation in sterling’s value.
‘This means the UK’s SME exporters and importers have to look for savings wherever they can find them. Unfortunately for years, banks have held SMEs hostage with over-the-top and unnecessary transaction fees for cross-border transactions.’
Making international payments easier with a currency broker
David Buskell, director of World Domination Music has a business which involves making royalty payments overseas, and the company also receives foreign income from its associates abroad when music is used in their territory.
In the beginning the company used the services of its bank to process both outgoing and incoming payments but found that the charges were high and the service not always as speedy as hoped for.
In 2011, a mutual contact within the music industry asked the company about foreign currency payments. ‘His own company has a significant range of both incoming and outgoing payments and so we were interested,’ says Buskell. ‘On speaking with him, we found that he routed all his overseas income through a currency broker thus removing the need for US dollar, Euro, Australian dollar etc bank accounts.’
The currency broker makes its money by being able to trade larger amounts on the currency market and getting better rates, Buskell says. ‘We investigated further and as a result signed up with the currency broker that our contact had recommended to us.
Sterling is transferred into our account either immediately or on our request and a full audit trail is produced. ‘The service is efficient and the rate we get for our currency is a significant improvement on what was offered by the banks,’ Buskell says.