Cross-Border Conflict: U.S. Small Businesses Face Expansion Hurdles Due to International Banking Complexities

Research from Wise shows that 40% SMBs operating internationally say international payments have made it harder to operate abroad

December 15, 2021 08:00 AM Eastern Standard Time

NEW YORK--(BUSINESS WIRE)--A new study released today by Wise (LSE: WISE) found that nearly a third (34%) of U.S. small and medium sized businesses (SMBs) are currently operating internationally, but broken payments and banking technology remain a barrier to international ambitions.

The study, which polled more than 4,800 SMBs across the world, found the most common reasons U.S. SMBs that are currently or intending to operate abroad seek to expand internationally are to reach new customers (55%), to improve long term growth prospects (33%) and to source new suppliers/resources (24%). The results are a strong indication of opportunities for SMBs to grow and expand their business by tapping into international markets.

However, while U.S. SMBs see significant opportunities in expanding globally, nearly half (49%) have felt discouraged or even prevented from expanding internationally. Among factors discouraging or preventing these U.S. SMBs, the cost and complexity of international payments ranked highest (45%), well ahead of cultural barriers (30%), supply chain and logistics (29%) and lack of capital/resources (27%).

“Today’s digital tools and marketplaces have created more opportunities for small businesses to operate globally, yet many are held back from ever doing so by a series of disconnected domestic banking systems that present significant barriers when operating internationally,” says Lindsey Grossman, Director of Product, North America at Wise. “Making international payments fast, simple and transparent will go a long way toward helping small businesses fully reach their business goals.”

A concerning finding from this survey is that even those already operating abroad are facing international banking woes. Eight in ten (79%) of U.S. SMBs already operating abroad, known as micro-multinationals, say it’s harder to operate abroad today compared to five years ago, particularly due to international banking (40%) including managing multiple currencies, bank accounts and costs.

Even more alarming, less than half (47%) found it easy to understand the cost of sending money abroad, and only 12% were able to correctly identify the costs involved in cross-border payments– not realizing that most providers charge both an upfront fee and a fee to the mid-market rate.

Wise, the global technology company building the best way to move money around the world, provides SMBs an alternative to traditional providers. Businesses can send money abroad for a small, up-front transparent cost, with no fee hidden in the exchange rate with 40% of transfers moving instantly. Business-friendly features include the option to obtain local account details in 10 currencies, which allows businesses to get paid and pay others like a local, all without ever stepping foot into a foreign bank.

“As a small business owner doing business internationally, living and working like a local is something I’ve done for eight years, but making payments has often proved to be a challenge,” said Jessica Watson, CEO and creative director of Points North Studio, a design studio based in Baltimore, Maryland. “Wise has been instrumental in helping us work with new talent and clients across the world. Unlike traditional banks, with Wise we are able to receive local bank details in Europe and have been able to efficiently manage money across borders without losing money to costly fees.”

Additional findings from U.S. SMBs already doing business internationally (micro-multinationals) include:

• The Pandemic’s Global Impact:46% of micro-multinationals have delayed or canceled international expansion plans. Nearly one in three (32%) found it more challenging to attract new customers.
• Digital Tools To The Rescue:75% of micro-multinationals say that technology has helped their business during the COVID-19 pandemic, so much so that 24% were able to reach new customers, and 31% were able to offer new services and products digitally.
• Banks and “old world” payments dominate: 70% of U.S. micro-multinationals rely on bank transfers or card payments when sending or receiving international payments yet, only 1-in-10 (12%) believe that they are getting bang for their buck from their banks.

To download the full report and learn more about how big banks block small businesses’ international ambitions, visit https://wise.com/p/msmb-survey.

About the research: 

The research took place online between the 16th August - 21st September 2021. The sample comprises 4,835 global senior decision makers in private sector micro, small and medium-sized (SMB) businesses across the world, of which 502 were in the United States. Micro-multinationals in this study have been classified as SMBs that are currently operating abroad. The research was commissioned by Wise and independently conducted by YouGov.