Just because small businesses are "small," does not mean they are not global. For instance, a small business may manage new functions that are crucial to their operations, such as international payroll, global freelancer invoicing, employee reimbursement for individuals overseas and more.
What ties all of these functions together is international payments. Unfortunately, some international payments providers, as well as policymakers generally, have not taken action to ensure that small businesses are afforded price transparency in this process. This means it's still hard for small-business owners and operators to understand the fees and taxes associated with international payments. Oftentimes, these businesses will spend more time trying to figure out the financial aspect of sending and receiving payments across borders than focusing on the business opportunities and strategy of international growth.
While there has been a shift in the financial products offered to small businesses to better support them, the reality is that they need more to expand globally, specifically in making international payments more transparent. To make this happen, public and private sector players must pull back the veil of shadows obscuring mass accessibility, and prioritize providing small businesses the transparency they deserve.
Research by the Export-Import Bank of the United States
These concerns are valid when you consider that small businesses are often unaware of what they pay to send, spend or receive money internationally due to fees hidden in inflated exchange rates. That's because pricing for these transfers and payments is misleading, with marketing claims of "$0" or "no fee" from big banks, which don't disclose the fact that their exchange rates are significantly inflated.
Small businesses deserve the opportunity to transact internationally without fear of hidden fees and unanticipated costs. However, there is a need for regulators and policymakers to step up and help make this happen.
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There are hundreds of existing support materials on the
Ultimately, the SBA, Commerce Department and other agencies can include in their existing support materials a recommendation to be mindful of exchange rate markup when buying and selling goods and services abroad and in international payroll. Plus, policymakers should remember that it's not just consumers who are impacted by "junk" fees — small businesses are, too. As future policies are being considered on this topic, small business pain points should be considered alongside those of consumers.
Regulators and policymakers are not the only ones that must act. Financial services providers also need to take up the mantle and support the international growth of small businesses. As a start, implementing best practices for delivering the products and services these businesses need will be a major benefit to this group.
Additionally, these businesses need financial services providers to provide transparent international payments, in line with the recommendations of global leaders, such as the World Bank. Importantly, those who work directly with small businesses should clearly show all costs resulting from exchange rate markups in their international transactions.
Policy can be nuanced. Policy can be complicated. But policy does not need to be murky. Through the collaborative efforts of leaders across public and private industries, small businesses in the U.S. will have the opportunity to grow internationally without the needless barriers and challenges that currently exist. The time to act is now, before the shadows obscure the light and American small businesses fall behind their global competitors.
