Top tips for getting paid in a foreign currency

Global e-commerce sales were valued at $3.3 trillion in 2022 but are forecast to reach $5.4 trillion by 2026. So, international expansion is essential to the success of modern e-commerce businesses. 

The globalized world offers better transport connections, delivery systems, and solutions for businesses looking to expand. Innovative services, enabled through worldwide improvements to internet connectivity, make it easier to grow regardless of borders that were once a massive obstacle to business expansion. 

But, there is one significant downside to doing international business: having to accept different currencies at regularly shifting exchange rates without sacrificing profitability. 

In this article, we’ll identify what e-commerce sellers need to bear in mind when getting paid in a foreign currency and how they can make payments in foreign currencies at preferential rates. We’ll also offer guidance to ensure your businesses remain as profitable as possible without locking out an expanded customer base.

Why are multiple foreign currencies necessary in the first place?

At a glance, many different currencies seem like a terrible idea. Wouldn’t it be easier if everyone used the same money for everything? The short answer is: not really because the value is relative. 

At a very basic level, the value of anything is determined by the items you can receive in exchange. But the amount of items in circulation, how hard a resource is to obtain, and what other people will pay for it all contribute to constant shifts in the relative value of everything. Currencies are no different. So, why not have everyone use the same currency everywhere? 

The economies of different countries require different forms of financial support and stimulus. What might be good for one country would be a terrible economic policy for another. Currencies allow governments and financial institutions to react effectively to crises and stimulate growth for the benefit of their citizens.

How foreign currency exchange rates negatively impact e-commerce sellers

Both customers and suppliers prefer to pay using their own local currency since they understand its value much easier. So, getting paid in a foreign currency is a necessary challenge for businesses with global ambitions.

Unfortunately, foreign currency exchange rates and charges can hamper international e-commerce businesses. Without the right currency trading and payments partner, e-commerce businesses can quickly find themselves on the receiving end of poor FX rates, slow transaction times, and extra handling costs – all of which impact your profitability and growth timeline.

How to easily get paid in a foreign currency

The best way to get paid in a foreign currency is to set up an account to receive funds from international customers, and convert them as quickly and cheaply as possible. Very few providers offer this service without charging high fees, but selected companies like Zyla specialize in accounts for international businesses.

How to make payments in foreign currencies and with the best foreign currency exchange rates

Making payments to international suppliers is more complicated. With valuations constantly changing, businesses need to be careful to minimize the instances of paying with foreign currency over its updated value. 

Luckily, there are a couple of ways that e-commerce businesses can hedge against these risks, if at least partly.

Get a forward contract

Forward contracts have the effect of “locking in” exchange rates for a set period on a volume of currency agreed upon in advance. Many e-commerce businesses use forward contracts to pay international suppliers since they make the process more predictable and stable. 

However, when the exchange rate changes, it could be to the seller’s detriment. It’s always best to seek expert advice on whether a forward contract is the best option for you and when the best time is to action them.

Understanding margin calls

Forward contracts are helpful in most cases. But, it is worth noting that there are some circumstances where a forward contract can’t reasonably sustain an unexpected financial shock affecting one currency.

The value of a currency might depreciate to such an extent that the preferential rates offered in the forward contract are no longer viable. For example, this might be because of natural disasters, unexpected government legislation, or business activity. 

When currency unexpectedly drops in value, you may be required to make a “margin call” to account for the difference. A margin call is an injection of additional funds to cover the shortfall in an asset’s value, which (depending on the fall in value) can sometimes be significant.

Get a spot contract

Another tool that e-commerce sellers can use is spot contracts. Unlike forward contracts, spot contracts take advantage of the rates that exist right now. 

Spot contracts are one of the simplest forms of international payment and are used for transactions that must occur immediately. 

For example, if your imports are hit with an unexpected fee or tariff, you can use a spot contract to settle it. Of course, if you expect a currency value to fall (and you have the time), it could be worth taking out a forward contract to save money.

Minimize risk when getting paid in a foreign currency

Getting paid in a foreign currency as an e-commerce seller can be fraught with financial penalties if small businesses aren’t careful. However, with the right financial service partner, e-commerce sellers can minimize the risk of doing international business across borders.

The best fintechs provide hands-on advice so you can confidently make the right decisions when getting paid in a foreign currency. Selecting the right partner is essential for e-commerce businesses that are determined to strengthen their companies and take advantage of an increasingly globalized world.

Maximize your profitability with favorable foreign currency exchange rates with Zyla

The Zyla Account is the hassle-free way to pay business partners and get paid from marketplaces quickly.

• Open multi-currency accounts with local account details
• Make fast and secure global payments to suppliers, staff and partners
• Collect funds from marketplace sales
• Keep costs down with competitive rates

The free-to-open Zyla Account enables businesses to make collections and payouts internationally – giving you the freedom to do business anywhere, all with the security of our online platform.  Open an account today and you could be approved, set up and trading internationally in 24 hours. Get started or find out more by calling (855) 797-3366 today.