Most startups and businesses now operate internationally. You may have a worldwide team, and you need to pay them in different currencies. You may have customers who want to pay you in their local cash or have to make bill payments to a company abroad.
The question then quickly becomes:
Could or should you hold money in different currencies? The answer is probably yes.
This article will help you find the best online provider to deliver the best multi-currency accounts.
First of all, a currency account, a multi currency account, or a foreign currency account are all the same thing.
A currency account is an account with a bank or similar financial provider which lets you hold different currencies from your local one.
For example, if your startup is in Silicon Valley in the US, then you will have a bank account to hold Dollars. (How to open a US corporate account)
If you wish, a currency account can be opened to receive, hold and pay in Euros, without having to exchange currencies back to dollars each time. The benefit being you would avoid lots of extra fees such as transaction charges and commissions each time you exchanged currencies.
Having different currency accounts for your startup doesn't mean you need to have overseas offices, foreign banks, or other complications. They can easily be opened with online providers or, sometimes, your bank. But be warned that banks are experts at disguising their fees by offering poor exchange rates and “superficial” charges for simply moving money across borders.
Your business could be losing out significantly if you operate globally and use your bank to change currency when making international payments.
You might want accounts to accept funds in different currencies. Lots of startups want to be as accommodating as possible and take customers from all over the world. This may mean local billing (charging customers in their local currency). So you might want to have an IBAN or a local account for the customers (or a third-party payment solution) to deposit into. This will save on international payment fees and poor FX rates forced on you by a bank if you only have one currency.
Often you will have suppliers who want to be paid in their local currency, which might be in another country. For example:
You could decide to hold funds in each currency, exchanging bigger chunks when there are favourable exchange rates. It's then easier to pay each bill when it's due, in the correct money, without worrying about the exchange rate movements.
It can help if you are worried about implications like Brexit, Covid or other political/international events and the impact on your expenses if the exchange rate moves significantly.
Where possible, you will want to have both an IBAN for international payments and local banking details. So, if you are seeking a USD account for your European based startup, you will want an account which also comes with its own account number and routing number (both Wire and ACH, the local details in the US), as well as an IBAN, all in the name of your startup. This will enable faster payments in or out and less risk of being charged additional fees.
Check how fast the payment will be processed. Some accounts will put all transfers through international payment routes such as SWIFT, which are slower and more expensive. (More on Payment Rails)
Many banks still make understanding their fees deliberately tricky. Don’t worry; there are some great options, but to save you the pain of picking the wrong one, here are the things to look out for.
Try to compare all the below when considering costs:
You could try your bank, where you currently hold your cash. However, these tend to be the most expensive and worst experience. On the positive side, they can be easier to monitor as everything is in one place (assuming your bank doesn't have a horrible interface).
You could try other banks or international banks like HSBC. You will probably still face the same expensive fees and bad user experience issues. It also adds one more log-in for you to manage. (More on UK currency bank accounts).
You have a lot of options.
Today, fintech companies and new online banks specialise in reducing these fees to zero. They have transparent up-front costs and use more competitive exchange rates, closer to the best rate possible, the Interbank rate. This is the rate you will see when searching for the exchange rate on Google and xe.com. It is considered the “real” exchange rate, but remember, it constantly changes according to demand for that currency on the open markets. When making a foreign currency payment, always look for the provider than offers the best exchange rate first, then check for any additional fees.
There are specialist options like Revolut, Rebank and Wise (formerly TransferWise) which focus on this service and tend to be more cost-effective than traditional banks and others. They also have a more transparent way of showing their charges.
🏖 Whatever methods you decide, we'll keep track of all in the same place
💎 Allowing you to receive seeds in different currencies at low fares
🛫 Paying international suppliers with low transaction fees
Best if spending approx. 10k or 50k per month (weekdays only), maxing out those allowances on the paid plans.
If occasional or very infrequent usage and otherwise simple banking needs
Best if you do regular business internationally or for large international transfers, such as moving capital funds. Get started with rebank.
From talking to hundreds of founders and their teams, we have found that comparing these kinds of costs falls down the to-do list fast. Switching banks is usually met with a look of pain and horror. If you are looking at switching for whatever reason, remember to make sure it makes financial sense. It’s also important to consider the time and effort required to do so. We compared three accounts that have a much faster onboarding process than a traditional bank. Both rebank and Wise have a relatively pain free sign-up flow. We recommend that you do not just optimise for cost but also how much time you will save too. Time is better spent doing what you do best, running your business!