Rare Book Monthly
Articles - December - 2006 Issue
Save Time, Increase Profits: Take Control of Your Foreign Affairs
Big banks provide competitively priced services only to their biggest customers.
Making foreign purchases is not much better. If you choose to pay with a credit card, you may not necessarily get the best price from the vendor (because they are getting discounted funds) and you are getting dinged with the same invisible charge: unfavorable exchange rates. This is also true if you use a service like paypal, which not only discounts funds to the seller, but gives the buyer poor value on the exchange. The seller also pays for the float (the delay in crediting funds to your account).
Using a bank to initiate a wire transfer is also problematic. We work with Bank of America here on Cape Cod. When they gobbled up our local Fleet in a survival-of-the-fittest move (who in turn had taken over Bank Boston, who absorbed Shawmut Bank) I thought that finally we were dealing with an institution savvy in international banking. They claim they "serve the financial needs of 98% of the U.S. Fortune 500" and 20% "of the midsized companies across the U.S. and in more than 20 countries...a universal banking leader" so I thought we had an organization that could efficiently, economically, and accurately help us with foreign transactions.
Not so. One would assume that costs are the same across the board with a wire transfer service, but this is not the case. Banks provide competitively-priced services only to its biggest customers. Despite being "a universal banking leader" few employees are trained at filling out the forms required to initiate a wire transfer. Smaller banks or banks in rural areas in the USA, unused to dealing with foreign transactions, may know little or nothing about the process, so you pay for their lack of knowledge not only with your money, but also with your time. I have it, on excellent authority, that some banks even charge usurious commissions (a percentage of the amount to be wired), if they think they can get away with it.
What I found in my own local branch on Cape Cod was a foreign funds delivery process that was at best inconvenient, and one that required manual data entry more than once (and so was prone to --and in fact produced -- errors). A foreign wire transfer was expensive not only in time, but in money. It included incoming and outgoing fees and a take-it-or-leave-it exchange rate. After driving six miles to the bank and waiting over an hour, do you leave the form on the table, drive home, and wait in line again for a bank officer if you don't like what they are charging you?
Receiving funds from our British bank was also problematic. It once took me a month to transfer pounds sterling from London into our dollar account here in Massachusetts. When everyone at both ends of the "wire" claimed they did not know what was going on, in disgust, I faxed both branch managers, told them that I didn't understand why a simple transaction between two accounts belonging to the same person could not be completed quickly, especially when it was between two of the world's largest financial institutions.
