Hidden Costs, Complexity of International Payments Threaten Small Business Expansion, New Research Reveals

- Nearly half (49%1) of SMBs surveyed cite complex international payments as an obstacle to global expansion

- SMBs lost an estimated $800 million to hidden fees on international payments in 2023 alone

American small- and medium-sized businesses (SMBs) looking to expand abroad face harsh logistical realities, shows new research commissioned by global technology company Wise. The complexity and cost of international payment services, alongside macroeconomic pressures, are cited as key barriers thwarting these businesses’ global ambitions. 

The research, conducted by Censuswide, polled 1,003 business leaders across the US, and shows that the economic environment SMBs face is challenging their ability to expand abroad. Unsurprisingly, over a third (34%) of small business leaders view inflation as the biggest challenge to their business operating internationally. This was closely followed by taxes (25%) and regulatory barriers (22%), which can be high-risk to get wrong and daunting to untangle without specific expertise.

Costly, Complex International Payments Blocking International Expansion 

International payments are ultimately causing SMBs the biggest headache when it comes to going global. Almost half (49%1) of small business leaders surveyed agree that the complexity of international payments prevents them from expanding their operations abroad, suggesting that financial services providers are doing more to hinder small businesses’ ambitions than support them. 

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Alongside complexity, the cost of international payments proves to be a major hindrance to SMBs' expansion plans. Over a third (31%) expressed that they would enter new markets if the costs of international payment were reduced, signaling a latent demand for growth opportunities abroad. 

$800 Million Lost: Why SMBs Need Transparent International Payments

SMBs lost almost $800 million in hidden fees when sending money internationally in 2023 alone. And business leaders are taking note; the vast majority (82%2) either don’t believe that their bank is transparent about the costs of cross-border payments or aren’t sure. 

A resounding 77%1 of SMB leaders surveyed agree that regulators and/or policymakers should ensure that financial services providers are honest and transparent about what they charge small businesses for international payments. Regulators and policymakers have an opportunity to help SMBs when it comes to transparency. Namely by providing more information on hidden fees in international payments and keeping this top of mind for future policies supporting the SMB sector.

But perhaps even more revealing, 81%1 believe that financial services providers and banks should proactively demonstrate honesty and price transparency on their own, without regulatory interventions. 

“This year, more small businesses will fight to stay afloat as they battle inflation, fluctuating interest rates, and shifting consumer demand,” said Jenny Miller, Head of North America Business Operations at Wise. “And even when they attempt to stay competitive by expanding into new markets, they’re being hit with hidden fees and inflated exchange rates that make this more difficult. 

“Small businesses are still largely unaware of hidden fees and inflated exchange rates because too often these same services are falsely advertised as ‘free’ or ‘fee-free.’ But there is a clear expectation for financial services to be transparent. While this research reveals that SMBs are grappling with a range of barriers and threats to their growth domestically and abroad, it also indicates a clear path forward for the industry to better support SMB goals and enable them to thrive in today’s global economy.”

About the Research

Hidden Fees Research - Conducted by Capital Economics

Capital Economics has estimated the fees on foreign exchange transactions paid by US consumers and small and medium-sized businesses nationally and in every state. The estimates are produced for the years 2018 to 2023 using data from US and international organizations as well as research of the typical transaction fees and exchange rates margins charged in five areas: consumer travel spending abroad, remittances sent from the US, trade in goods and services by small and medium-sized enterprises and portfolio investment earnings abroad. Data is accurate as of January 10, 2024. 

SMB Research - Conducted by Censuswide

A survey of 1,003 “business decision makers” working at small- and medium-sized businesses in the U.S. (businesses with 1-500 employees) - minimum 125 per Texas, California, Florida, and New York with the remaining sampled across the rest of the U.S. – conducted by Censuswide between April 4 and 16, 2024. Censuswide abides by and employs members of the Market Research Society and follows the MRS code of conduct and ESOMAR principles. Censuswide is also a member of the British Polling Council.

1 ‘Strongly agree’ and ‘Somewhat agree’ responses combined

2 ‘Strongly disagree’, ‘Somewhat disagree’, 'Neither agree nor disagree', and ‘Somewhat agree’ responses combined

About Wise

Wise is a global technology company, building the best way to move money around the world. With the Wise account people and businesses can hold over 40 currencies, move money between countries and spend money abroad. Large companies and banks use Wise technology too; an entirely new cross-border payments network that will one day power money without borders for everyone, everywhere. However you use the platform, Wise is on a mission to make your life easier and save you money.

Co-founded by Kristo Käärmann and Taavet Hinrikus, Wise launched in 2011 under its original name TransferWise. It is one of the world’s fastest growing, profitable technology companies and is listed on the London Stock Exchange under the ticker, WISE.

16 million people and businesses use Wise globally, which processes £9 billion in cross-border transactions every month, saving customers around £1.5 billion a year.

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