How Forex Companies Are Changing the Game for Small Businesses

forex for small business growth

69 percent of U.S. business development and corporate strategy professionals anticipate that their companies will invest in geographic expansion, especially in high-growth and emerging markets, according to KPMG.

As SMEs continue to take on more multinational clients and partners, foreign exchange will become a prominent factor of their business operations in the globalizing economy, and forex payment companies can help.

Forex Services for SMEs

FX providers are focused only on currency, and unlike a bank they can afford the time to really get to grips with the profile of their clients and create a truly bespoke FX solution.

Previously I explored the reasons businesses may need forex companies along with the types of businesses that typically benefit from third party FX services. Here I talk with Ashley Groves, Vice President of Key Accounts at AFEX, a leading global payments solutions provider, about how forex services can help SMEs save time and money while hedging against currency fluctuations.

How do forex payment companies change the game for SMEs in the globalizing economy?

As the world becomes more connected, it is becoming far easier to source suppliers and sell your goods/services all over the world. It is therefore vital that your company is ready to make and receive payments internationally. An FX payment provider will help prepare your company to receive and send international payments.

For example, one account with AFEX gives our clients access to over 40 incoming currency accounts, meaning if our client all of a sudden starts selling into Denmark, immediately they can receive incoming wires in DKK, and we can convert the funds into USD the same day for them.

An FX provider can help educate the SME to ensure that they are fully prepared on how to budget FX costs into their quarterly and yearly cash flow forecasts. An forex provider can also help set a ‘costed level’ on the currencies they are using to ensure there are no surprises.

FX providers are focused only on currency, and unlike a bank they can afford the time to really get to grips with the profile of their clients and create a truly bespoke FX solution.

How does an FX payments company work for a small business?

Certain FX payments companies such as AFEX are set up to service small- to medium-size enterprises. We exist due to the clear discrepancy in the level of FX services and products offered to different ‘tiers’ of clients by the banks. As brokers, FX payments companies sit between the banks and their clients, combining the clients’ buying power to receive preferential rates from a bank.

An example would be: A US-based client will come to an forex payment company with an invoice in euros that needs to be settled. The FX company will discuss the state of the Euro with the client, and once a price is agreed upon they lock in that price, securing the USD amount of the invoice. The client will then settle via ACH, wire or check. As soon as the funds are received, the Euro payment is released directly to the beneficiary stated on the invoice, in local currency and at a fraction of the cost that would have been charged by a bank. At AFEX usually we see a savings of around 2-3 percent, and we can even offer $0 wire fees!

Can a forex function be built in-house, or should businesses focus on using third party services?

…The strategy will be impartial and help take out the emotion associated with ‘pulling the trigger’ on currency transactions.

Forex is a complicated commodity affected by political, social and both macro and micro economic factors. To stay abreast of the constant movements and the way they affect the FX markets, a business would need teams of people. The vast majority of SMEs don’t have the resources available in-house to effectively manage the FX risk to their cash flow or balance sheets. Foreign payments companies can create a bespoke strategy that will ensure protection against currency fluctuations which will require very little effort to maintain and can be executed with a small finance team. Another important point is that the strategy will be impartial and help take out the emotion associated with ‘pulling the trigger’ on currency transactions.

What would an FX payment company’s services typically cost?

I can only speak on behalf of AFEX. There are no upfront costs to open an account with AFEX, and there are no consultancy fees or maintenance costs. AFEX uses our clients’ buying power to ultimately achieve wholesale pricing from the bank and then pass these cost savings along to our clients. Typically banks will charge a 3-4 percent markup to their clients depending on their relationship with the client. AFEX will charge a small spread between the price we buy at and the price offered to the client, often showing 50-75 percent savings as well as offering $0 transaction fees.

Here’s an example:

Supplier invoice cost (EUR)€20,000.00
Funds converted via bank$26,480.00 (bank rate is 1.3240)
Funds converted via AFEX$25,672.00 (AFEX rate is 1.2836)
Normal bank wire fee$25
AFEX wire fee$0
Total benefit$883

This is a great example of how AFEX saved one client over $800 (over 3 percent!) on one trade.

How are FX payment companies evolving?

As global markets evolve and emerging markets continue to develop, investors need to plan for minor and exotic currency increases. We are seeing a far larger requirement for exotic currencies such as the Brazilian Real and Indonesian Rupiah as well as minors such as the Hungarian Forint and Mexican Peso. Investors and companies are finding it easy enough to send funds out there, but the repatriation has always been an issue. We are spending a lot of time enhancing our relationships with local banks to open up strong pipelines that allow companies to send and receive in both exotic and minor currencies. An example of this is the Chinese Yuan. Until recently the Yuan was nearly impossible to buy and sell. With our relationships we were able to create a way for investors to fund and repatriate seamlessly to and from China.

For more information on AFEX, please visit, or learn more about how Powerlinx, the global B2B matching service, can help you conduct business abroad.

Featured image by Warriorwriter.