Let’s imagine a company that buys products from a Chinese supplier asking for payment in RMB. Then this company sells the products to a client in Europe who pays in Euros. Here’s the issue: this company finds itself dealing with more than one currency.
As international trade of goods and services is a business routine for most companies, they need to optimize the way they receive and make payments in multiple currencies. This is where a multi-currency account brings value to your business.
1. What is a multi-currency account?
It is a type of bank account that allows your company to receive, pay and hold more than one currency. The key feature is that the account details (beneficiary name, account number, SWIFT code) remain the same for all currencies.
Multi-currency accounts are offered by most banks in Hong Kong and they usually include, at a minimum, the following currencies: Hong Kong Dollar, US Dollar, Euro, British, Singapore Dollar, Japanese Yen, Australian Dollar and Chinese Yuan.
2. Which business can benefit of multi-currency account?
A multi-currency account help save time, costs and efforts when your business makes and receives payments in several currencies. Meaning that any cross-border businesses dealing with multiple currencies will benefit from having a multi-currency account.
For instance, a multi-currency account is useful if:
- Your business trades internationally; be it exporting, importing or both
- You operate an e-commerce store which sells goods or services in multiple currencies
- You employ staff abroad or work with freelancers overseas
- You’re an independent contractor or freelancer who works with international clients regularly
3. What are the benefits of a multi-currency business account?
Some benefits are obvious and easy to understand. Others require an understanding of foreign exchange (FX). Set out below, based on increasing level of FX complexity, are the 5 major benefits of dealing with a multi-currency account:
Benefit #1 – Communicate a single bank account number to your clients
Gone the time when you had to communicate different account details for each currency. You can spare the hassle to your customers: use the same account details for all the currencies held in your account.
Benefit #2 – Save time on reconciliation & accounting
With a multi-currency account, your end of month accounting becomes a whole lot easier.
You (or your accountant) will spend less time reconciling as you have the ability to issue invoices in one currency and get paid in the same currency:
- no more headaches trying to match invoiced and paid amounts in different currencies
- less accounting adjustments required for exchange rate difference
Benefit #3 – Save money on foreign exchange commission
Let’s assume your company only has a single currency account, i.e. the account accommodates your home currency and no other.
Now a client makes a payment in another currency (let’s say USD), your bank will convert this currency into your home currency (let’s say HKD) to deposit the funds into your account. And of course, your bank will charge a substantial foreign exchange commission to convert these funds. For a business that receives a lot of payments in multiple currencies, these commissions can add up pretty quickly.
One of the biggest advantages of a multi-currency account is to avoid the payment of foreign exchange commissions. Funds paid to your company in one currency are credited to your multi-currency account without the need for any conversion (assuming of course that this currency is one of those accommodated by your multi-currency account).
Benefit #4 – Trade currencies at the right time
With a multi-currency account, you can easily move money between different currencies. Even if your objective is not to become an FX trader, it gives you the opportunity to buy/sell currencies when the exchange rate is favourable. And the good news is that banks usually do not apply any charges on these intra-account transfers.
Benefit #5 – Get familiar with FX forward contracts to keep your clients happy
Are you familiar with international clients insisting to pay you in their local currency? Obviously, that won’t be your preferred choice: you would rather have them pay you in your local currency and not theirs. No surprise here as neither you nor your clients want to have their business exposed to foreign exchange risk.
Having a multi-currency account may be the first step toward a solution.
Let your client pay you in their local currency assuming these are supported by your multi-currency account.
At this point, you haven’t ruled out the foreign exchange risk as you are holding funds in your clients’ currency on your account. However, your risk is not immediate. It will only materialize if you convert your clients’ currency into another currency at a time at which the foreign exchange rate is not favourable.
To prevent this potential foreign exchange risk, you should consider the use of FX forward contracts. For a small cost, these contracts give you the possibility to lock the foreign exchange rate at which you will convert your client currency in the future.
In summary, coupling the advantages of a multi-currency account to FX forward contracts may help you keep your clients happy.
4. How to open a multi-currency account in Hong Kong?
If you want to open a multi-currency account for your business in Hong Kong with a bank, then be ready to run a marathon.
If you’re more of a sprinter, apply with Statrys now to save time and money:
- Application is 100% online – no need to visit a branch
- 10 minutes of your time – skip your next coffee break, and you will finish the application
- Quick response – guaranteed to hear back from us within 48 hours after the request is submitted.
- No account opening fee (except for special companies), no initial deposit, no minimum balance – our fees are easy to understand and transparent.
Your Statrys multi-currency business account comes with:
About the author
Bertrand Théaud is the Founder of Statrys. His entrepreneurial journey has inevitably exposed him to the difficulty in dealing with banks, especially in Hong Kong. When he realised the number of SMEs going through the same challenging experience, he decided to start Statrys: a digital alternative to traditional banks specifically designed to serve the needs of Asian SMEs and start-ups.