International Money Transfers: How Do I Pay Overseas Vendors?

Businesses choose to import foreign goods and services for various reasons. Sourcing for your raw materials or manufacturing your products overseas, allows you to save on costs and maximise your profits. It’s also possible that the items you need can only be found on foreign shores. 

For example, if you’re a local Singaporean fashion boutique, you might prefer buying spools of cloth directly from a textile craftsman in a country like Indonesia or India and making garments in a factory nearby. This could help drive down your costs significantly. 

A tricky problem that crops up when dealing with overseas vendors however, making international payments. Cross-border money transfers involve extra processing fees or bad foreign currency exchange rates, which can affect your profits or pass along the fee difference to your supplier. 

International money transfer services: Common Problems 

Paying overseas vendors using well-known methods like bank transfers, PayPal or credit cards

can involve expensive hidden fees, a high forex spread cost and complicated procedures.

High processing fees 

Bank-to-bank transfers, done through the internet, by phone or physically at the bank, may be the most familiar payment method — and so the most trusted. Yet, banks do not offer the best deal.

Banks usually have weak rates, high fees and hidden costs. What may not immediately be apparent are the handling commissions and agent bank charges which could cost you up to SGD30 to 35 per transaction (depending on the bank of choice). While this may seem like a small fee, it can be costly if multiple transactions are made. This might result in paying a premium for shipping your raw materials or goods to Singapore. 

PayPal’s international money remittance service fees depend on whether you’re transferring to another PayPal account or to a bank account. For the former, it would be 5% of the total transaction amount, plus other additional charges of funding fees. For the latter, it would depend on the current market exchange rate, which could reduce the final amount you actually transfer to your suppliers. 

High forex spread cost

Different currencies are traded across international borders on the foreign exchange market, also known as FX or forex. Large international banks and a number of other currency services and investment companies are major players in this industry. 

The trading of currencies remains one of the most opaque and least regulated markets. In this monopolised environment of little transparency, banks can get away with offering rates in their favour. Mid-market exchange rates are the “real” exchange rate before the banks add a profit margin. The difference in rates is called the “spread”. With thousands of international money transfers made everyday, these firms make a tidy profit. And the larger the transaction, the higher the profit — and the greater the cost you bear.

Banks handle cross border transfers set by bid and offer pricings determined internally and inaccessible to an outsider. The bid is the price they are willing to pay you and the offer is the price they’re willing to sell. 

For example, if you are making a payment of 100,000 Singapore Dollars to a company in Malaysia, you plan on converting the amount to Malaysian Ringgits. When a spread is applied to the mid-exchange rate of 1 SGD to 3.1 MYR, the bank offers a rate that is lower, say 3 MYR instead of 3.1 MYR. Should this happen, you will lose 3,000 SGD in the process. Only 97,000 SGD would have been transferred to your service provider! 

Why use Opal’s Cross-Border Money Transfer solutions? 

Hefty hidden costs can deter you from wanting to use overseas vendors. However, with Opal’s Cross-Border Money Transfer solutions, you don’t have to be. It has no fees and competitive exchange rates, letting you transfer money without the additional extra costs. 

Our rates are much lower cheaper than that of the banks and are pegged to the mid-market exchange rate. With Opal, you can transfer with over a hundred different corridors, including Denmark and Vietnam amongst others. 

Having to compare the rates offered by the different banks and financial institutions can also prove to be a hassle. Opal’s smart system selects the most cost-efficient and suitable channel to get your money across based on country, currencies, credit time requirements, and size of transaction.

Opal is a licensee of MAS and a Major Payment Institution (MPI). You can rest assured, knowing that we comply with stringent legal and cybersecurity standards. Our internal code of integrity also ensures that we make certain that your cross-border money transfers are delivered safely and securely. Opal’s online remittance service is an affordable and convenient option that keeps both you and your overseas vendor satisfied.