How to solve the $800 million problem that’s keeping small businesses from expanding abroad

Running a small business in America today is no “small” feat. The challenges are enormous – from unpredictable supply chains, to inflation, to a maze of complex regulations. However, one of the challenges that pushes many small and medium-sized businesses over the edge is probably one you were not expecting: international payments.

Small businesses today operate globally from day one. Today’s global marketplace, transformed by the pandemic and with the continued rise of social media, implies that the demand for and provision of products and services is now not limited to one geographic location. And for any company, large or small, international expansion can mean recent customers, recent suppliers and recent opportunities.

However, many small business leaders’ hopes for global expansion – and all the advantages that come with it – are being dashed by a series of macroeconomic and logistical challenges. These difficulties are enormous, the biggest of which is the cost and complexity of international payments.

According to A recent survey commissioned by Wise, almost half (49%) of small business leaders agree that the complexity of international payments prevents them from expanding their business abroad, and over a third (31%) said they’d enter recent markets if the costs of international payment payments were lowered. Inflation, taxes and regulatory barriers were also mentioned as the important obstacles to globalization.

This hesitation to expand globally is not an exaggeration on the a part of business owners. In 2023, U.S. small and medium-sized businesses (SMEs) were almost lost $800 million in hidden fees regarding international payments – perhaps when sending money to suppliers in China or paying contractors in the UK. In other words, $800 million price of fees were hidden in inflated exchange rates, so international payments weren’t only costlier than they must be, but fraudulent. Ultimately, small businesses are all about money flow, so they need to know exactly how much they are paying and for what services.

It’s disappointing that hiding fees stays standard practice in international payments, but it is also not surprising. It’s not a problem you hear about every day, in part because it is very difficult to detect. And although they exist efforts by consumer-focused regulators to prevent false promoting of ‘free’ or ‘free’ services, hiding costs in an inflated exchange rate, we have yet to see the same efforts made for small businesses. The glaring gap in support for small and medium-sized businesses – and the overall gap in the existence of dedicated, business-focused regulators – not only harms businesses financially, but also undermines confidence in financial services’ commitment to integrity and their purported love for small business owners.

While there are many issues to address at an industry level, business owners can take matters into their very own hands without waiting for suppliers to catch up on transparency. As I work with small businesses every day on their global financing needs, here are some top suggestions to help leaders overcome the challenges of expanding abroad:

1. Study: Take the time to read the superb print of any financial services contracts. Be aware of potential hidden fees and their impact on your profits. This will be easily done by comparing the exchange rate you see with your provider with the rate listed on Google. If they do not match, there is probably a hidden exchange tag.
2. Choose transparent payment providers: With this information in mind, look for financial service providers that provide transparent pricing models. Avoid those that claim to be “free” – they are likely to inflate costs through hidden fees in exchange rates.
3. Protect yourself against currency fluctuations and exchange rate risk: Expanding abroad means supporting multiple currencies, which may expose your organization to volatile exchange rates. To prevent such fluctuations from taking you by surprise and significantly impacting your profit margins, look for providers that provide automatic conversion services that robotically convert your money between two currencies once the desired rate is reached. This makes budget and money flow management more predictable.
4. Take the guesswork out of your supply chain: If you run a small business sourcing or selling goods overseas, it’s no secret that international supply chains can experience delays, high shipping costs and complex trade regulations. Consider working with firms that specialize in international transport and customs clearance. Having access to a convenient, transparent solution that permits you to track where your shipment is at every turn – identical to you’d want to have the option to see where your money is in real time – gives you peace of mind and allows you to get back to running your small business.

The $800 million lost by small and medium-sized businesses due to opaque fees for international payments is not only a number – it is a barrier to growth and stifling innovation. However, with the right tools and knowledge, firms can overcome these challenges and achieve their global business goals.