5 benefits of a multi-currency account

Increasingly, businesses are operating across borders and need business account solutions that allow them to send and receive money wherever their customers and business partners are.

With traditional single currency bank accounts, you have to pay a currency conversion fee for each transaction. But with the rise of multi-currency accounts, this is no longer the case.

Here we outline five benefits of using a multi-currency account.

Related: Thinking About Doing International Business? Tips for dealing with multiple currencies

What is a multi-currency account?

A multi-currency account allows a business to receive, send, and hold money in more than one currency. This sets it apart from a single currency account, which always requires money to be converted to and from the account’s “home currency.”

Banks, neobanks or fintech companies can issue accounts in multiple currencies.

Please note that a multi-currency account does not mean each-currency account. The specific currencies that can be used with a multi-currency account are determined by the bank or fintech providing the account.

Which company can benefit from a multi-currency account?

A multi-currency account can save time, money and effort for any business that trades different currencies.

A multi-currency account is beneficial for businesses that:

• International trade through export and/or import.
• Run an e-commerce store that sells its goods in multiple currencies.
• Hire staff abroad or work with freelancers abroad.

It is also beneficial for solopreneurs, independent contractors, and freelancers who regularly work with international clients.

Related: How borderless payment could change European business forever

What are the benefits of using a multi-currency account?

Benefit #1: Reduce exchange costs

Perhaps the most important reason to have a multi-currency account is to reduce: exchange fees. On a single currency account, all payments received in other currencies or payments in any other currency will incur currency conversion charges. In the case of banks, this fee can be significant. For companies operating in more than one currency, these costs add up quickly and are a significant expense.

A multi-currency account allows money to be held in the ‘out-of-home’ currency: there is no need to convert, although the company may of course decide to do so – at a time of its choosing.

While there is often a small fee for converting from one currency to another within the multi-currency account, because the conversion needs to be done less frequently, the conversion costs are significantly reduced.

Benefit #2: Streamlined Reconciliation and Accounting

One of the complications of running a business in multiple currencies is dealing with the mismatch between invoices in one currency and payments in another. Not to mention justifying the extra currency conversion transaction on every payment or receipt.

A multi-currency account allows payments to be received in the billed foreign currency, meaning invoices and payments match, and there are fewer total transactions to account for. While foreign currency amounts may need to be shown in the “home currency” for financial reporting purposes, this is only required periodically (rather than constantly) and usually does not require actual currency conversion.

Benefit #3: Manage currency fluctuations to your advantage

A number of major currencies have emerged in recent years substantial unexpected dips. Since multi-currency accounts make it easy to convert currencies at any time, a company may choose to convert currencies when the exchange rate is in their favor and defer it when the exchange rate is unfavorable.

In contrast, the company is forced to accept the consequences of an unfavorable fluctuation with one currency account.

Related: 5 Ways to Save on Foreign Currency Without Paying Huge Fees

Benefit #4: Combine with FX futures to lock in prices

When a company contracts with customers in a currency other than its home currency, it can be difficult to predict the final amount that will be paid. With a single currency account, the company is subject to the exchange rate that the bank or fintech uses at the time of payment.

By combining a multi-currency account with a FX forward contracthowever, a business can receive and hold the payments in the customer’s chosen currency, and then fix a future exchange rate to convert them into their home currency at a specified later date.

Benefit #5: Simplicity of one account and interface

Without a multi-currency account, it may be necessary to maintain multiple separate accounts in different currencies (foreign currency accounts). Transferring between those accounts creates unnecessary complexity for smaller businesses and makes it harder for entrepreneurs to have a “quick overview” of their financial status.

With modern multi-currency accounts, an intuitive interface makes it clear at a glance how much money the company has in each denomination.

Growing a business internationally requires a reliable mechanism for making and receiving payments in more than one currency. Multi-currency accounts allow businesses to save on exchange rates and transfer money internationally more quickly and effectively.