Operating as a Spanish business internationally, I soon realized about one of the most annoying fees that apart of taxes, were the financial expenses attached to every transaction of money coming in or out of our accounts.
When the business started to grow, we found ourselves paying four to five figures monthly fees for financial expenses, to payment intermediaries that set abusive costs only because we were working in markets with a different currency or location than ours.
The typical financial expenses you will find across your online marketing money flow are:
- Payment cards currency fees (hidden inside the applied conversion rate)
- Payments currency fees in Paypal (hidden inside the conversion rate)
- Affiliate networks payment processor fees (transfer and currency conversion can apply)
- Payment gateway transaction fees
- Payment gateway currency conversion (usually hidden inside the conversion rate)
- Bank account currency conversion
These expenses can sum a total between 7% and 10% of your transactions when not optimized properly, so cutting them can have a significant impact even if you are starting with online marketing and need to bring your campaigns to positive ROIs.
Paypal is one of the most popular payment processors around the world, it has an easy integration with most of the ecommerce platforms out there and customers trust the brand and their buyer protection services. However, this position is often abused by Paypal charging very high fees in different steps of your money flow.
Here is a visual representation of the Paypal fees problem:
The first hit represents in this example almost 5% of the received amount.
The second hit comes when you try to take the money out of Paypal into your bank account with a different currency.
In this example, the market currency conversion rate was at 0,908 EUR , while the exchange rate they are applying is over 3% under the market rate. Keep in mind this also happens when making payments from Paypal in a certain currency which you don’t have in your Paypal balance. They will withdraw the money from your bank at their currency conversion rate.
Together with the previous fee we sum a total of 8% over our receivables.
While the transaction fee is something that can be negotiated over time and Paypal has discounted rates for businesses that grow over a certain volume of transactions, the currency exchange rate is something that will remain after you grow.
While it was easy to switch most of our clients to a different payment method, regardless of the method we chose we could never get rid of the currency exchange fees, they were present in Paypal, Stripe, in our business bank account.
For a time we thought about opening a bank account in different currencies, but the maintenance fees our local bank was offering didn’t improve much the situation.
After some research, I found several FX service providers, companies that will take your dollars, yuan, or any other currency and buy them with a payment in your local currency and your local bank, usually within the same day they get the foreign currency and at a fee much lower than any bank or payment gateway.
A Cheaper Way to Receive Our Payments: Kantox
We use Kantox to receive our affiliate commission payments without having the affiliate network or their payment processor make the currency conversion to our local Euro currency.
This solution has reduced our transaction fees and currency conversion fees to a 0.29% of the received amount, which translates into thousands of dollars that now we can spend in other business lines. Plus they issue an invoice for their fees, transferring you the exact market rate local currency which makes things much easier for accounting.
Operationally Kantox requires a bit of financial planning, since you must use their platform to book a transaction each time you are expecting to receive foreign currency funds, specifying the amount and the currency you will receive, together with the top date funds should arrive. They will send you then the instructions for you to provide to your client or affiliate network in order to transfer the funds to their account and complete the trade.
The money hits your account in your local currency most of the times within the same day they receive the funds in the original currency and their fees are billed by the end of the month.
Get a free consultation from Kantox on how their services can benefit your business here.
A Cheaper Way to Withdraw Our Paypal Balance: World First
World First is also a Foreign Exchange service provider that can offer you a better value for your foreign currency, but they offer a very interesting e-commerce solution that simplifies operations when working with international payment gateways.
When becoming a World First customer, they provide you with an agent bank account under your name, which will be used exclusively for their operations. In our case, we received a U.S. Citibank checking account, which we registered in both our Paypal and Stripe profiles.
Since the account is in USD, now we are able to withdraw to it our USD balance from Paypal or Stripe, at zero cost.
Once the funds arrive in our Citibank account, you can set up your profile with World First so that they transfer automatically the corresponding amount of local currency to your local bank account, you can also leave the funds in your foreign currency account waiting for a better exchange rate.
You can negotiate the transaction fees with World First, depending on your volume, but in any case their offer will be much cheaper than your usual Paypal or Stripe forex fees.
Use the coupon code Todor20 when signing up for World First and you will get £20 off your first international money transfer over £1000. (Check their terms here).
Wrapping it Up
Hopefully now you have a better idea on where you can optimize your current expenses and lower your currency conversion costs.
Just to be sure, here are the main points I covered in this article:
- Financial institutions and payment processors set their own currency conversion rates when you receive or pay on a different currency than your local one.
- You can end up losing over 4% of your money compared to the market conversion rate.
- You will reduce your currency conversion costs to 0.29% when receiving big payments from affiliate networks or clients by using the services of Kantox.
- For receiving multiple customer payments from your e-commerce store in a different currency, create an e-commerce foreign bank account with World First. This will reduce your foreign exchange costs and improve your operations.
Now it’s your turn!
How much money did you save optimizing your currency conversion fees?
What kind of currencies and markets you operate with?
Let me know in the comments.
Muchas Gracias por el aporte , es realmente interesante !!
lo unico que no me queda claro es como mandar el dinero de paypal a worldfirst ??
Nosotros tenemos una tienda en ebay y recibimos pagos en eur usd y GBP y la cuenta pay pal es en Eur cada ved que convertimos los USD O GBP A Eu para transferirlos a nuestro banco de España perdemos mucho dinero .
Si pudieras asesesorarnos un poco mas detalladamente sobre esto , estariamos super agradecidos .
un saludo y muchas gracias !!
Hola Daniel! WorldFirst al terminar el alta te da una cuenta bancaria, en mi caso no pude añadirla directamente a paypal ya que se trataba de una cuenta USA y la interfaz de paypal solo deja añadir cuentas bancarias locales, pero contacté con el soporte técnico y la añadieron manualmente.
Una vez tienes la nueva cuenta bancaria añadida a tu perfil de empresa de paypal, puedes hacer retiros de paypal hacia ella igual que lo haces con otras cuentas bancarias y WorldFirst te transfiere el dinero a la cuenta que tengas configurada con ellos en España.
El soporte de Paypal de pedirá que les mandes un justificante bancario que demuestre que eres el propietario de la cuenta bancaria, WorldFirst puede darte ese documento. Incluso con él, tuve que insistir un poco para que me añadieran la cuenta, pero finalmente la añadieron. A Paypal no le gusta perder negocio 🙂
Hola , muchas gracias por la información , parece muy interesante
¿Cómo sería el proceso en Stripe?
1- hay algún requisito para hacerte cliente de World First para que te den la cuenta citibank en dólares
2- ¿Cómo vinculas esa cuenta a tu perfil de stripe? ¿Te permite tener stripe dos cuentas bancarias para diferentes web o negocios , una en euros y otra en dólares?
Muchas gracias, muy interesante su información
Hola Alberto, no hay requisitos en World First, la cuenta en dólares es parte de su servicio. Una vez te den el número de cuenta simplemente tienes que añadirlo en el apartado de cuentas bancarias de Stripe.
Stripe permite subcuentas, así que es fácil tener una en Euros para España por ejemplo y otra como tenemos nosotros en dólares.
Hola Todor! buenísmo aporte! sabes si a día de hoy sigue funcionando el método de vincular Worldfirst con Paypal y Stripe? lo sigues recomendando? Gracias!
Hola Eduardo! Con Stripe sigue funcionando sin problema. Con Paypal tienes que insistir. Ponen pegas muchas veces porque no vas a tener un certificado de propiedad directa de la cuenta de Citibank, sino que es a través de un intermediario, pero a mi me aceptaron el certificado que emite World First después de insistir bastante.
Buenísimo! ya estoy con el proceso de alta 🙂 Aprovecho para lanzarte una última pregunta:
Si tu empresa es Española ¿el echo de tener una cuenta bancaria en USA a tu nombre repercute de alguna forma a nivel fiscal con Estados Unidos o requiere algún tratamiento especial? Básicamente usaría dicha cuenta para pagar a proveedores Chinos.
Tener cuenta en USA hoy por hoy no te implica fiscalmente allí, eso depende de tu actividad económica y si en ella está envuelta la jurisdicción de USA (por ejemplo vendes allí). En el caso de pago a proveedores Chinos no suena como algo relacionado con el mercado estadounidense, pero depende de cómo generes el dinero entrante en la cuenta, si es con una tienda orientada a USA infórmate bien con un fiscalista.
My problem is that WordFirst US account is not on my name (on WorldFirst name) and I need to write a note with a reference number for wire transfers if I want to arrive any money to my personal WorldFirst account. But I cannot be able to do this in PayPal during withdrawals. How to get my money on WorldFirst without the reference number or is a method to give this number anyway or it doesn’t matter?
Thanks a lot,
Hi Tamas, thanks. In my case I requested World First to issue a reference letter stating that they are an agency and they operate this bank account on my name. With this letter and some insistence I was able to get Paypal to add the bank account to my profile.
Hi since I am from Italy will world first Work and whats the difference with Transferwise?
I heard Payapal blocked transfers to external platforms like those or added a 3% fee equally even if they do not convert anything …
Hi Stefano, World First works also in Italy. The main difference with TransferWise are their currency conversion fees. TransferWise starts to not be competitive for larger amounts ot transfers (over 1k EUR) and in these transactions WorldFirst will give you better fees and a much better currency conversion rate.
I have my Paypal connected with WorldFirst without a problem and they don’t add any currency conversion fee to the transfers from my PP balance to WF.
Hey Todor , I am from Italy too . I really like your article 🙂 I own an ecommerce and I’ve opened an account with Worldfirst . Where do I find worldfirst usa bank account details to add to paypal ? thank you 🙂
Hey Saverio, thanks for the feedback. Once you open the account with them get in touch with support and ask them for the ecommerce account, they should provide you with a Citibank account statement that you can give paypal so that they add the account to your profile, that’s what we did.
Thank you Todor , for now my paypal account let me add bank details only for Europe Country , maybe because I still don’t have paypal business account ? What would you suggest , do I contact paypal support ?
Right, they don’t allow it through the interface so you will have to contact Paypal support once you have the full account info and ask them to add it manually to your account.
Thanks for the article Todor! It was exactly what I was looking for since I’m in a similar situation.
However I want to point out that Worldfirst stopped operating in the US since a short while ago. An alternative could be Payoneer or Transferwise:
Hi – Todor – recently Paypal began to charge a 3% fee for transfer from ones US$ Paypal balance to another US$ bank account in most non-US countries around the world! i.e if our Paypal account is in Australia or New Zealand then even though we are getting US$ paypal funds coming into our Paypal account for a 2.something % fee then PAYPAL are demanding an EXTRA 3% to transfer from my US$ paypal balance to my Transferwise US$ bank account because my home country is NZ !!! 🙁
Do you know anyway around this? They only way i can think of is to get a US base Paypal account but this is very difficult
You’re right, they are doing the same with us in Bulgaria, even though there it’s perfectly normal to have a USD bank account and the money is received in USD they still apply this charge… The only way to avoid this that I know of is to set up a company or use a company based in the US which would allow you to get this US-based PayPal account, but your turnover should be worth it.