Commercial Insights

How to Reduce Foreign Exchange Risk and Costs

Mar 24, 2023 • 5 minutes
global
MCAs reduce foreign exchange costs, protect against market fluctuations, and safeguard against forex risk.

“For businesses sending or receiving payments in foreign currencies, MCAs are the way to go,” said Dr. Jeffrey Beisler-Snell, head of international banking for Synovus. “MCAs enable businesses to send and receive wire transfers in one of five designated foreign currencies while reducing foreign exchange (forex) costs, protecting against market fluctuations, and safeguarding against forex risk.”


Why an MCA?

  • No need to open a foreign bank account
  • Reduce forex risk and fees
  • Hedge against market fluctuations
  • Purchase foreign currency in bulk

To open an MCA, you choose your currency option for each account. If you regularly transact in more than one currency, you simply open different accounts for each currency. Once the account is set up, you make and receive global payments using that account. The benefits of MCAs are significant.

  • Lowers fees. Holding and receiving funds in your designated currency eliminates the need to convert funds to U.S. dollars every time you make a transaction. This saves significant forex transaction and conversion fees and eliminates any hidden fees or inflated prices charged to “foreign” customers. You’ll pay for your goods and services in the desired currency, with no conversion required.

  • Reduces currency rate volatility. Corporate treasury officers don’t like surprises, especially the inevitable currency fluctuations inherent in global commerce. When locking in a conversion rate, you can hold foreign currency funds as part of your overall treasury strategy, paying for investments or purchases overseas hedging against the risk of currency market volatility.

  • Simplifies payroll. If you’re seeking talent overseas or already employing people who live abroad, paying them in their native currency is easier with an MCA. You can buy currency in bulk, so you already have your funds available in the currency you choose.

Carefully consider MCA options before selection.

All MCAs eliminate the need to convert foreign currency collections and payments to U.S. dollars when you make transactions, but not all MCAs are created equal. And not all financial institutions offer MCAs to small- and medium-size customers. When considering a specific MCA, here’s what to look for:

  • The right currencies. Which currencies do you typically use, or will you use for future transactions? MCAs are currency specific — only one currency per MCA — so be sure you choose a treasury partner with the MCA currency options you need.

  • U.S.-held funds. Be aware that some banks only offer MCAs based in Europe or the Caribbean. Using a U.S.-based MCA can be easier. For example, opening an MCA with a U.S. financial institution is like opening any other bank account, so it can be done quickly. Also, your domestically held MCA will be managed by U.S.-based representatives who are available during business hours you’re accustomed to. Holding foreign currency in a U.S.-based account also eliminates tax and compliance complications when repatriating funds, and U.S.-based accounts are FDIC insured up to the maximum limit allowed by law.

  • Transparency: You’ll want access and visibility into your MCA via your regular banking web portal. And be sure you can purchase foreign currency in bulk, which makes regularly sending and receiving international payments simpler.

MCAs are sophisticated, yet easy-to-manage solutions for businesses that want to make global payments.

Synovus can provide the international banking expertise businesses need, as well as assist in reducing forex risk and costs. Synovus MCAs are available in Euros (EUR), Canadian dollars (CAD), Pound sterling (GBP), Japanese yen (JPY) and Australian dollars (AUD).

If you’re interested in learning more about multi-currency accounts, complete a short form and a Synovus Treasury & Payment Solutions Treasury Consultant will contact you with more details. You can also stop by one of our local branches.

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Important disclosure information

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

  1. U.S. Census Bureau, “Preliminary Profile of U.S. Exporting Companies, 2021,” October 5, 2022 Back
  2. International Trade Association, “U.S. Trade in Goods and Services” Infographic, February 2022 Back
  3. ibid Back