By Brandon Banks
When it comes to expanding your business on a global scale, one of the most important considerations is your payment strategy. You may have been using a multi-currency processing (MCP) system to handle payments from different countries. However, as your business continues to expand, you may find it more beneficial to switch to a like-for-like settlement system.
Understanding the benefits and requirements of each option will help you make an informed decision that is right for your business. In this article, we’ll take a comprehensive look at when it’s the right time to make the transition, the benefits of like-for-like settlement, and what you need to do to make the switch.
Reasons to Start with Multi-Currency Processing
MCP has become a popular payment strategy for many businesses, providing a way to accept payments from various countries and currencies. It allows you to test the waters in a new country or market and ensure your business will be successful before committing to a long-term strategy.
Tax implications, strict compliance requirements, and other concerns can make it very expensive to establish a local merchant account to facilitate like-for-like settlements. It makes more strategic and financial sense for businesses to transition to this model at a later stage of growth.
When to Make the Transition to Like-for-Like Settlements
As transaction volume grows, MCP becomes increasingly more expensive and you will need to weigh the benefits against the costs. Once your transaction volume reaches around $200,000 in USD, it may be time to consider transitioning to like-for-like settlement, where payments are settled in the same currency as the transaction.
This option can provide significant cost savings, making it a more viable option for larger businesses. By evaluating your payment strategy and making informed decisions, you can ensure that your business is maximizing efficiency and profitability.
Requirements for a Local Merchant Account
Before you can transition to like-for-like settlement, your business must establish a local merchant account. This involves the following prerequisites:
- A local entity — You must establish a legal entity in the country where you wish to open a local merchant account. This may involve registering a local branch or subsidiary, depending on the jurisdiction.
- Staff — You will need to employ local staff members to manage operations and liaise with local banks and regulatory authorities.
- Local bank account — Open a local bank account for your business to receive settlements and manage transactions.
- Compliance with local regulations — Ensure your business adheres to local laws, regulations, and industry-specific requirements, such as Know Your Customer (KYC) and Anti-Money Laundering (AML) policies.
Evaluating the Right Time to Progress Your Strategy
Overall, transitioning from an MCP to a local merchant account could be the key to ensuring your business’s successful global growth. This upgrade can offer faster approval rates, more cost-effective payment processing, and access to local debit cards. Ultimately, it all depends on the specifics of your business’s growth and transaction volume. When you reach approximately $200,000 in USD in transactions each day, it’s definitely time to weigh whether the added costs of a like-for-like settlement outweighs its benefits.
If you need any more help in understanding what’s involved in making this transition, please don’t hesitate to reach out to us at Nexio. We are always more than happy to provide advice and guidance.
Our focus goes beyond just providing payment solutions — we strive to be a valuable partner for our clients. We believe in building exceptional and lasting relationships that transcend traditional boundaries, to create versatile and innovative solutions that deliver exceptional value. Experience the Nexio difference today!