International Payments | Articles
Today’s business customers are thinking global – are you?
The ease of international business fueled by the internet expanded the customer base for smaller enterprises.
For budding entrepreneurs, credit unions and community banks have long been the driving force behind their launch. Many secure their start-up loans from these smaller institutions, who tend to offer easier access to capital, more favorable rates and a personalized relationship. In short, customers can count on them to serve as an ally during the key phase of their development.
Supporting a new business has always been a risk for any money lender. Despite case studies, plans and market trends, it’s impossible to accurately predict how a new company will fare. In the past, these small-scale ventures were limited to local operations. Geography was often a “front and center” consideration. Stores, restaurants and specialized services were among the common investments financed by backers and the partnership worked well for both parties for a significant period.
Of course, the nature of small and medium sized businesses has changed, and it remains to be seen if their financial partners can keep up. The ease of international business fueled by the internet expanded the customer base for smaller enterprises. They could now reach global consumers as easily as those in their community. This set-in motion significant growth potential to these owners, as well as the opportunity to source cheaper inventory and services from global vendors. For instance, due to a weaker comparative currency and availability of labor, manufacturing a product overseas can provide a significant savings that could both increase profits and allow for a lower sale price to end buyers.
In terms of a customer base, seeking cross-border sales can expand an owner’s market exponentially. Emerging markets like Asia, Latin America, Africa and the Middle East often have higher growth rates than North America. With an increasingly global marketplace, it’s also becoming more of a necessity to develop internationally, rather than a luxury. Localized small businesses must compete with worldwide players in their own backyard so limiting their base can be a recipe for disaster. In the United States, small businesses account for over 95% of all companies involved in international trade and comprise in excess of 30% of all exports.
Where does this leave the community banks and credit unions, who gave the companies their initial capital? These institutions may retain their day-to-day banking business but may struggle when these customers pursue international payment services and foreign exchange elsewhere. Even a simple retailer may have to pay overseas vendors for merchandise, staffing or other services. In fact, in today’s environment it can be challenging to keep all operations strictly domestic.
This trend may increase with the passage of time. If a financial institution cannot support a business in this capacity, they run the risk of becoming obsolete. After all, time is a precious commodity when running an independent operation and a bank that can consolidate all necessary services into a single space seems to provide major value and can ultimately retain a competitive advantage in the marketplace.
Increasing the scope of available products within a community bank or credit union is obviously easier said than done. International transactions are complex and require adherence to a multitude of regulations as well as the creation of new infrastructure. One solution is to partner with Western Union Business Solutions, an established name in the field who can provide a customizable solution that is easy to implement with existing systems. This investment can provide an essential service for clients, offer new revenue streams and help expand your overall relevance across your customer base.