The Biden administration has been driving forward its
For businesses of this size the challenges are unique. Often there is no safety net when dealing with cash flow, employee sourcing and retention, customer or client service and the ability to scale. Relying on tools for financial, employee and operational management are critical to success. That's why it's no surprise that SMBs experience hidden costs that could be
Many SMBs, especially sole proprietors, are operating globally from day one. They may be working with international clients, managing freelancers abroad or using a vendor in another country. All of this involves international payments. Unfortunately, that's where one of the biggest "junk fees" exists for these businesses, who have more trouble negotiating foreign exchange rates than larger players. In 2023 alone, SMBs
What is hidden exchange rate markup? Exactly what it sounds like: international money transfer providers showing customers a bloated exchange rate. This allows them to take a fee while telling customers their services are "fee-free" or "no fee." When you're running a small business with global ties these fees will seriously add up over time and make a big impact on your bottom line.
This practice is dishonest and does a disservice to the SMBs that are crucial to America's economic success. Leaders of these businesses are taking note — because it stifles their growth. A
Many of the fees that the agency derides as unnecessary are funds owed to medical practices, homebuilders and educational institutions.
While there's certainly room for improvement from industry players, there's also an opportunity for the Biden administration to take action on this issue. As it stands, there's a bit of a missed connection between what different agencies are focused on. Agencies like the Department of Commerce are entirely focused on U.S. economic competitiveness. On the other hand, the Consumer Financial Protection Bureau, the Federal Trade Commission and others are acting, where they can, to crack down on junk fees. But we've yet to see the two initiatives — junk fees and U.S. competitiveness — connect, despite them being closely linked.
These agencies can come together and figure out how to provide the support SMBs really need. Economic competitiveness? Let's talk about ensuring transparency and speed in international payments so SMBs are able to grow their businesses globally without incurring additional costs, or wondering when they will be paid. Fighting junk fees? SMBs feel the impact of these fees too and there are agencies, like the FTC, that can provide support here.
That's not all. The Department of Commerce, the Small Business Administration and other relevant agencies can work together to provide better resources and information to SMBs navigating global growth. Updating materials to include callouts on hidden or "junk fees" in exchange rate margins would make a major difference for many SMBs looking to understand how to save money on costs, or better navigate the complexity of international payments. Policymakers can do the same here. As legislation about junk fees consumers face is being considered, there's an opportunity to look at what SMBs are facing here and to help them as well.
Regulators and policymakers need to look at how they can best support these businesses. The "junk fee" problem SMBs face won't be solved overnight. But it also won't be solved if no action is taken.
