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It has never been easier to trade worldwide. We can send and purchase goods or services from pretty much anywhere on the planet. However, one aspect of global trade has been stubborn in its refusal to adapt – creating a local banking footprint in the countries you want to trade in.
Having a foreign bank account brings big benefits for many businesses seeking to expand internationally or manage cross-border transactions. However, the process can be complex, time-consuming, and costly, requiring extensive documentation, regulatory compliance checks, and local authentication.
These bureaucratic hurdles can lead to long approval timelines and business operational inefficiencies. Foreign banking practices differ widely across countries, and for many companies wishing to scale, navigating this complexity is a significant barrier to entry. Businesses are caught in a web of endless paperwork, fluctuating fees, and minimum balance requirements, making foreign accounts challenging to maintain and manage.
It’s only in the last few years that genuine alternatives have arrived that simplify the process. But first, let’s review why businesses may need a foreign bank account and some of the common difficulties they encounter.
Why do you need a foreign bank account?
Reasons to open a foreign bank account include ease of handling transactions in local currencies, managing local payroll, be more efficient in cross-border money movements, and potentially benefiting from favorable exchange rates.
With a local bank account, businesses can pay suppliers and employees in their native currency. Not only does this eliminate international wire fees, but it also reduces the time it takes for payments to settle in a foreign employee’s bank account. And in certain jurisdictions, having a local account to pay those employees compliantly is a regulatory requirement.
Having an established local account also removes the need to double-exchange funds.
Without a local account, you collect money from a foreign territory to your home bank. Then you’ll need to transfer it across borders to pay a local supplier, paying FX fees for two transactions rather than one. With a local bank account, you can receive funds directly and redistribute those funds in-country without incurring exchange costs.
Having an onshore account allows businesses to access better exchange rates. Local banks may offer more favorable terms for specific currencies than traditional international accounts. Even minor rate improvements can add up significantly for companies with high volumes of cross-border transactions, making a foreign account an appealing option for the cost-conscious businesses.
The Challenges of Opening a Foreign Bank Account
Traditional foreign accounts are often slow to set up and involve complex regulatory hurdles. Most banks require extensive documentation and compliance procedures, including Know Your Customer (KYC) and Anti-Money Laundering (AML) checks, which vary by country. This process can stretch weeks to months, slowing business operations and diverting focus from growth.
Delays in foreign payments can disrupt supply chains, stall payroll, and lead to costly currency exchange losses. If a company needs to pay vendors or employees on short notice without an established local account, navigating slow international transfer timelines can create severe operational challenges. Businesses increasingly require real-time solutions.
Here are four key challenges companies face when opening a foreign bank account, making the case for more straightforward, flexible solutions.
1) Lengthy Documentation and Compliance Requirements
Setting up a foreign bank account requires extensive paperwork, including business licenses, tax identification numbers, personal identification of authorized signers, and proof of address.
For many companies, gathering these documents is the first challenge. In addition to standard paperwork, banks must conduct stringent KYC and AML compliance procedures. These checks are designed to prevent financial fraud and ensure that the account owner is verified. However, compliance procedures can be labor-intensive and require in-person verification, particularly if local regulators impose strict documentation standards.
2) Long Approval Timelines
Once the documents are submitted, the approval process can take considerable time, with wait periods stretching from weeks to several months.
Each country has unique regulatory requirements, and banks often need to authenticate documents with local authorities. This additional step introduces delays, especially when documents must be notarized or translated or when international verification is required.
For companies that need immediate access to foreign funds, such as startups launching new ventures or businesses entering new markets, this wait time can disrupt operations and create financial stress.
3) High Operational and Maintenance Costs
Operating a foreign bank account typically involves ongoing costs that add up quickly.
Monthly maintenance fees, currency conversion costs, and international transaction fees to fund the account are common and vary depending on the bank and country. In many cases, banks also impose minimum deposit requirements or demand that a specific balance be maintained. These requirements can tie up crucial funds for businesses operating on tight margins.
Additionally, fluctuating fees can make budgeting difficult, as costs may increase based on transaction volumes or changes in exchange rates.
4) Managing Multiple Accounts and Exchange Rates
Companies operating in multiple countries often need more than one foreign account, further complicating their financial management.
Each account has terms, currencies, and fees, which can be challenging to oversee. Exchange rate fluctuations ensure further complexity, requiring constant monitoring to avoid losses. Businesses may also need specialized resources or software to track accounts and manage the movement of funds effectively, adding to the costs. Finance teams can soon find themselves using multiple systems to manage their international cash holdings.
These challenges make opening and maintaining a foreign bank account(s) prohibitive for many companies without a legion of finance team members, or overly complex for those organisations with large finance teams.
Luckily, there are alternatives. Virtual accounts offer a unique proposition for rapidly expanding global enterprises.
5 Ways Virtual Accounts Simplifies International Banking for Businesses
Virtual account capabilities offer businesses an efficient alternative to opening traditional foreign bank accounts.
1) Faster Onboarding
Fintechs simplify onboarding by minimizing required paperwork to what is necessary. This ensures businesses can quickly and securely fulfil compliance requirements without needing extensive KYC and AML checks for every transaction. Proprietary infrastructure and strategic partnerships of virtual account providers allow for smoother account creation.
This makes virtual accounts a regulatory-compliant, straightforward option for businesses needing immediate access to global banking capabilities.
2) Rapid International Transaction Processing
Virtual accounts also give businesses the advantage of rapid transaction processing. You can make all your domestic and international payments on the same platform that you open your virtual accounts on.
Fintech companies offering virtual accounts leverage their payment network to ensure that cross-border transactions are processed within faster timeframes. In most instances, cross-border payments can be fulfilled within 48 hours.
These accelerated payment capabilities mean businesses don’t have to deal with the long wait times common with traditional banks. Moving funds, paying suppliers, or managing payroll in multiple countries without delay becomes a reality.
3) Cost Efficiency Compared to Foreign Bank Accounts
Fintech’s offer competitive, transparent fee structures with preferential exchange rates.
The platforms offering virtual accounts provide companies with a flexible, cost-effective solution that keeps more of their funds accessible. This affordability and quick set-up time are attractive, especially for small and medium-sized businesses needing international payment capabilities without a heavy cost burden.
4) Simplified Reconciliation Processes
When you have multiple foreign bank accounts data is disconnected. Each account needs to be reconciled in accordance with the region's standards. This can add hours, if not days, of admin hours for a finance team.
Virtual account solutions, on the other hand, offer simplified and automated reconciliation processes. Utilizing these capabilities can save time, and teams can redirect resources to more important areas of a growing company.
5) Global Currency Options and Real-Time Exchange Rates
Real-time exchange rates allow companies to convert currencies instantly and transparently, and preferential rates reduce currency exposure risks. Stored value capabilities in multiple currencies mean companies can time conversions strategically to avoid forced transactions during adverse currency fluctuations, adding an extra layer of financial control.
Quick onboarding, rapid processing, cost efficiencies, and flexible currency options make Global Accounts a practical alternative to opening foreign bank accounts.
What is Global Accounts by TransferMate?
With TransferMate’s virtual account solution, Global Accounts, businesses can hold and manage funds in 30+ currencies. It is a core product within the TransferMate Platform.
Users can quickly open virtual accounts with addressable accounts with unique BICs and IBANs. They can make local payments in 140+ currencies, store value, issue and collect invoice payments, and convert (FX) between multiple currencies in a flexible way that suits them.
Real-World Comparisons: TransferMate vs. Opening Foreign Bank Accounts
Sometimes, it’s easier to understand real-world examples of how these differences make the biggest impact. Here are three case studies of businesses using TransferMate’s Global Accounts capabilities to manage international finances better.
A Business Expanding in Europe
Carr & Day & Martin, a Connolly’s RED MILLS subsidiary, recently sought to expand into Sweden. They required a local Swedish bank account to manage transactions with suppliers in the region.
However, the company encountered numerous obstacles.
They would have had to engage in a lengthy setup to open a foreign business account. The reconciliation processes would have taken capacity from their finance team, which wasn’t worth the investment for the limited number of supplier payments. These challenges put them off opening the bank account and expanding operations.
As a current TransferMate customer, the company was able to sidestep these challenges entirely. TransferMate’s Global Accounts allows them to make payments in Sweden without opening a physical bank account, cutting down on onboarding time and reconciliation processes.
“We receive money from our customers in Swedish Kroner directly into our Global Account. We can then control that money and decide whether we're going to use some of the funds to pay suppliers in Sweden or when we're going to convert it to Euro, which will depend on the FX rate. It's convenient. And easy to open additional accounts...” - Colleen Kavanagh, Financial Controller, Connolly’s RED MILLS
A Growing Travel Company Managing Exotic Currencies
Kovena is a specialized travel agent and booking services provider working with tourism clients. They relied on traditional bank accounts across different regions to manage bookings from tourists and distribute funds back to service providers in multiple currencies.
This setup required juggling various accounts, paying high currency conversion fees (especially on exotic currencies), and dealing with unfavorable exchange rates. The arrangement became costly and complex as the company grew, eating into its profit margins and complicating its financial management.
Using Global Accounts, Kovena centralized its cross-border payments with access to real-time exchange rates and the ability to hold funds in various currencies within the same account. TransferMate’s competitive conversion fees and rapid processing times helped streamline their operations, making their international transactions more cost-effective.
“Compared to a bank, the rate is much better. It's more transparent. And, regarding the FX cost, TransferMate is much better than a bank.” - Pargol Mohsenpour, Head of Operations, Kovena
An Enterprise with a Distributed Workforce
Konnectedly supports companies installing software projects and upgrading their IT systems. They employ individual consultants in multiple countries to work on these projects and companies that need to engage in individual projects.
Their previous reliance on foreign bank accounts meant dealing with delayed payroll processing times, variable transfer fees, and exchange rate fluctuations.
With TransferMate, Konnectedly streamlined payroll for its international team. TransferMate’s platform allowed them to automate and process employee payments in their local currencies, providing faster and more predictable payroll cycles.
This simplified payroll management allowed the company to focus on supporting its distributed workforce with reliable, timely payments and enhanced financial control.
“The cost savings have been incredible, for sure, with the savings per transaction really adding up over time. But I’d say the real savings come from time. Before, it could take 2 days to make all our payments, now it takes 2 hours.” - Diana Lorincz, Finance Consultant, Konnectedly
How to Get Started with TransferMate: A Step-by-Step Guide
You can start building your own international banking network by creating an account with TransferMate. Once onboarded with TransferMate, opening and using your virtual accounts is easy.
Opening a Global Account:
Once signed up and onboarded for a Global Account, users press an “activate” button next to the currency in which they wish to open an account. All account details are issued in real time, including unique BICs and IBANs for each supported currency.
Topping up a Global Account:
Adding funds to a Global Account is quick and easy.
If your regular bank account is in the same currency as your Global Account, you can send funds directly from your bank’s online portal or mobile app. If your regular account is in a different currency, use the Make a Payment feature to top up your account in your chosen currency with preferential foreign exchange (FX) rates.
Converting Currencies in a Global Account:
Users can convert funds between Global Accounts at the click of a button.
Once currencies with active accounts are selected, customers are shown live FX rates, and all transfers are conducted in real time. The conversion rate is also collected for future reporting purposes.
Paying and Receiving with a Global Account:
After a successful Global Account setup, users can supply their customers or debtors with unique BICs and IBANs from the relevant account and receive payments.
Users can also use their accounts to pay in the recipient's local currency quickly and at a lower cost, just like a foreign business account.
Too Long; Didn’t Read
Opening a foreign business account, or a global network of them, is a daunting process that can take weeks, months, or years, depending on the jurisdiction and number of accounts needed.
Thankfully, virtual accounts solutions such as Global Accounts by TransferMate, can expedite that process so you can focus on expanding your business internationally.
Sign up for a Global Account today and build your own international banking network to manage multiple currencies, pay, and receive globally within a few clicks. It’s so fast, it’s impossible to do it any quicker.
