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Take Control of Your Foreign Affairs, Part II - By Renee Roberts Don't settle for de facto exchange rates. By Renée Magriel Roberts In my December article I discussed some of the problems that we booksellers face in buying and selling overseas, with a specific focus on the expense and time involved in buying books from overseas sellers: Vendors may want payments in their own currencies, either by wire transfer or by bank draft in their own currency. Or, if they are in Canada or the USA, they may prefer EFT/ACH electronic payments. What is the simplest way to initiate these transactions? Third-party transactions in foreign currencies create timing issues. How can one guarantee that the exchange transaction will allow a reasonable profit? How can costly bank fees and unfavorable exchange rates be avoided? How can one eliminate the extra credit card charges incurred when dealing with foreign exchanges? Time is money in our industry. How can we avoid the long lines at the bank and the do-overs from processes that are not efficiently set up? How can we readily transfer funds between accounts in the USA and overseas at minimum expense and effort? In order to begin solving these problems, we found we needed more control over the central process in any foreign purchase: the actual exchange to and from US dollars. By better understanding and controlling the process, we avoided just about all of the time and energy drains of doing business the old way. Taking control of our foreign affairs started out with just getting better information on the current and ever-changing exchange rates. We began by using XE.com. A free and easy-to-use site, XE.com launched its flagship service, "The Universal Currency Converter"®, to dynamically calculate exchange rates among all 193 of the world's currencies. The XE payment system used to make trades, which we will describe later in this article, supports the 15 major world currencies: * AUD Australia Dollars, * CAD Canada Dollars, * CHF Switzerland Francs, * DKK Denmark Kroner, * EUR Euro, * GBP United Kingdom Pounds Sterling, * HKD Hong Kong Dollars, * JPY Japan Yen, * MXN Mexico Pesos, * NZD New Zealand Dollars, * NOK Norway Kroner, * SGD Singapore Dollars, * SEK Sweden Kronor, * USD United States Dollars, and * ZAR South Africa Rand. Using XE.com is extremely easy. You just plug in an amount in one currency and pick the target currency; the Currency Converter displays the result and the exchange rate used in the calculation. In addition the Universal Currency Converter will display the so-called mid-market rates for many other currencies. You can readily bookmark this site and use it whenever you wish, and there is also a library of free web tools to integrate the technology into your own site as a customer service.
Take Control of Your Foreign Affairs, Part II - By Renee Roberts Selling globally requires knowledge of best currency conversion methods. Although we are not speculators in the money market, we regularly need to know (and so do you) what our dollars will buy in foreign currencies and vice versa. As explained to me by Steven Dengler, CEO of XE.com, the exchange rate is not centrally regulated. It is like an enormous bazaar where buyers and sellers offer and sell currencies at different rates. The mid-market rates quoted by XE.com provide a mid-range guideline, a thumbnail sketch, for figuring out what it will cost to buy or sell. What you actually pay, however, depends entirely upon the methodology you use to make the exchange. If you do not take control over the exchange methodology you are at the mercy of the bank, credit card company, or third-party site (or the price in dollars quoted by the vendor). What we chose to do was to set up an account with XEtrade, (www.xetrade.xe.com), the on-line discount foreign exchange service of XE.com. XE.com is the world's most popular foreign exchange website. This is confirmed by all independent metrics companies, including giants like Alexa, Nielsen, and ComScore. As a transaction aggregator, XEtrade is able to give us the service, the focus, and the competitive rates that only the largest companies have heretofore enjoyed with their banks. An XEtrade account is free and does not require us to change or alter our banking relationships. They do, however, require copies of personal identification and the same information one might supply to a bank when opening a new account. Once the account is set up, it can be used to perform any number of extremely useful bookselling functions. Here are some examples: We have a U.K. corporation and a bank account in L (United Kingdom pounds) in London we use for European sales. Routinely we transfer funds from the U.K. to our home bank here in Massachusetts. In the past I would initiate a transfer by faxing a signed request to the U.K. with the wire information of the USA bank. The U.K. bank would charge a fee, do the currency conversion and then send our money in $ (US dollars) to our bank here. Our home bank would also charge a fee for the incoming wire. The conversion rate was just what parties decide to charge (or think they can get away with). -- that is, the UK bank could give us pretty much any rate they wished at the time the conversion occurred. In retrospect, that was a pretty poor business methodology for us, but it had never occurred to us that we could do better. With an XEtrade account the methodology and the results are very different. After creating the XEtrade account, I set up the USA bank as a wire beneficiary and the London bank as a wire source of funds. XEtrade is up 24/7, so I can initiate transactions at any hour. I identify the amount I wish to transfer and the source and target currencies, then select the source bank and the beneficiary bank from my pull-down lists. The site immediately quotes the exchange rate and the wire transfer fee. When I submit the transaction, a print-out is produced that I can fax to my bank in London. Now, here's where the magic happens. My bank in London does not do a conversion and does not do a foreign wire, both of which are expensive. Instead, they wire funds in pounds sterling to another London bank, an account tied to XEtrade with a unique transaction number that identifies my entire funding process. It is a local wire.
Take Control of Your Foreign Affairs, Part II - By Renee Roberts No need to wait in line at the bank. XEtrade performs the conversion at the rate I agreed to on XEtrade's website, at no extra charge. United Kingdom pounds become US dollars. From there, the funds in dollars arrive at a New York bank and are wired locally to my bank. From my US bank's perspective, a domestic wire in US dollars has arrived, and so I am not charged the higher foreign wire transfer fees, nor subjected to their draconian currency conversion rates or their iffy foreign exchanges services. I've saved high fees at both ends of the transaction, in addition to receiving a far better exchange rate. I've also simplified the transaction for both the sending and receiving banks, reducing the probability of errors. If you are not in a big hurry and don't mind waiting a few extra days, the entire process can be virtually fee-less. Just today I purchased some books for our store inventory from a foreign supplier. It is simpler and much less expensive to offer a supplier payment in their own currency, as I did in this case using a bank draft. I set up my USA account as an EFT account through XEtrade and let them draw the funds direct after an online trade is made. Once they have the dollars they convert to the foreign funds, at the agreed-upon rate, and then they create a bank draft in the foreign currency (in this case, Canadian dollars) which they send to my vendor. I am able to perform this function entirely online and during off-hours. I send an email to my vendor letting them know how I am planning to pay. There is no extra charge for EFT draws or bank drafts, and XEtrade guarantees that they are giving me the best exchange rate. The reason they can do this, Steven Dengler explained, is that my small transaction is aggregated with those of many other large companies. Therefore instead of getting the take-it-or-leave it bank rate, or the credit card rate, or the let's throw a dart at the dartboard rate, I receive the service very competitively, without the rip-off fees. And, what's more, I can do all of this at my convenience, on my computer, at any time. I can set up any vendor that I do business with in this way, so that future transactions are quick, and I can use multiple funding sources -- thus far, our US- and UK-based banks. As we expand to other countries, I expect that we will add other bank accounts and other vendors as well. I should also quickly mention that XEtrade solves the forward transaction problem -- how do you guarantee an exchange rate with a certain, future sale that will take place during an indeterminate period. The answer is to create a similar transaction, but this time with a 30-day (or even a year!) period, guaranteed at the quoted rate.
Take Control of Your Foreign Affairs, Part II - By Renee Roberts Get more Euros for your Dollars. I admit that all of this is not psychologically easy. First of all you have to get past the language barrier: the heart of every transaction is not a book purchase but a currency "trade". A "beneficiary bank" is the bank that is receiving the converted funds. A "draft payee" is a person or business receiving a check in converted funds. An "EFT Bank Account" is a bank account from which you permit XEtrade to pull dollars to be converted. Then, there is the trust thing about sending all of your personal information to a new company, as well as setting up your bank accounts to send and receive funds, but this is really no different than opening an investment account. I recommend starting simply: use the XE.com site for calculations, then when you're comfortable and ready, move on to XEtrade, open a free account, and try a straightforward bank-to-bank wire transfer via a "Basic Trade". I asked Steven Dengler about XEtrade's business model -- how does XEtrade make money? The answer is through the exchange rate, by charging a small amount in the spread above the actual cost of making the trade. In comparing his business to the banks and credit card companies, Steven said, "Some businesses rely upon an ignorant consumer base; we rely upon a well-informed consumer base." We work too hard for the money we make, so we are choosing to be members of the latter, not the former group. Renee Magriel Roberts can be reached at renee@roses-books.com.

Take Control of Your Foreign Affairs, Part II

- By Renee Roberts

Don't settle for de facto exchange rates.

By Renée Magriel Roberts

In my December article I discussed some of the problems that we booksellers face in buying and selling overseas, with a specific focus on the expense and time involved in buying books from overseas sellers:

Vendors may want payments in their own currencies, either by wire transfer or by bank draft in their own currency. Or, if they are in Canada or the USA, they may prefer EFT/ACH electronic payments. What is the simplest way to initiate these transactions?
Third-party transactions in foreign currencies create timing issues. How can one guarantee that the exchange transaction will allow a reasonable profit?
How can costly bank fees and unfavorable exchange rates be avoided?
How can one eliminate the extra credit card charges incurred when dealing with foreign exchanges?
Time is money in our industry. How can we avoid the long lines at the bank and the do-overs from processes that are not efficiently set up?
How can we readily transfer funds between accounts in the USA and overseas at minimum expense and effort?

In order to begin solving these problems, we found we needed more control over the central process in any foreign purchase: the actual exchange to and from US dollars. By better understanding and controlling the process, we avoided just about all of the time and energy drains of doing business the old way.

Taking control of our foreign affairs started out with just getting better information on the current and ever-changing exchange rates. We began by using XE.com. A free and easy-to-use site, XE.com launched its flagship service, "The Universal Currency Converter"®, to dynamically calculate exchange rates among all 193 of the world's currencies. The XE payment system used to make trades, which we will describe later in this article, supports the 15 major world currencies:

* AUD Australia Dollars, * CAD Canada Dollars, * CHF Switzerland Francs, * DKK Denmark Kroner, * EUR Euro, * GBP United Kingdom Pounds Sterling, * HKD Hong Kong Dollars, * JPY Japan Yen, * MXN Mexico Pesos, * NZD New Zealand Dollars, * NOK Norway Kroner, * SGD Singapore Dollars, * SEK Sweden Kronor, * USD United States Dollars, and * ZAR South Africa Rand.

Using XE.com is extremely easy. You just plug in an amount in one currency and pick the target currency; the Currency Converter displays the result and the exchange rate used in the calculation. In addition the Universal Currency Converter will display the so-called mid-market rates for many other currencies. You can readily bookmark this site and use it whenever you wish, and there is also a library of free web tools to integrate the technology into your own site as a customer service.

Take Control of Your Foreign Affairs, Part II

- By Renee Roberts

Selling globally requires knowledge of best currency conversion methods.

Although we are not speculators in the money market, we regularly need to know (and so do you) what our dollars will buy in foreign currencies and vice versa. As explained to me by Steven Dengler, CEO of XE.com, the exchange rate is not centrally regulated. It is like an enormous bazaar where buyers and sellers offer and sell currencies at different rates. The mid-market rates quoted by XE.com provide a mid-range guideline, a thumbnail sketch, for figuring out what it will cost to buy or sell. What you actually pay, however, depends entirely upon the methodology you use to make the exchange.

If you do not take control over the exchange methodology you are at the mercy of the bank, credit card company, or third-party site (or the price in dollars quoted by the vendor).

What we chose to do was to set up an account with XEtrade, (www.xetrade.xe.com), the on-line discount foreign exchange service of XE.com. XE.com is the world's most popular foreign exchange website. This is confirmed by all independent metrics companies, including giants like Alexa, Nielsen, and ComScore. As a transaction aggregator, XEtrade is able to give us the service, the focus, and the competitive rates that only the largest companies have heretofore enjoyed with their banks.

An XEtrade account is free and does not require us to change or alter our banking relationships. They do, however, require copies of personal identification and the same information one might supply to a bank when opening a new account. Once the account is set up, it can be used to perform any number of extremely useful bookselling functions.

Here are some examples:

We have a U.K. corporation and a bank account in L (United Kingdom pounds) in London we use for European sales. Routinely we transfer funds from the U.K. to our home bank here in Massachusetts. In the past I would initiate a transfer by faxing a signed request to the U.K. with the wire information of the USA bank. The U.K. bank would charge a fee, do the currency conversion and then send our money in $ (US dollars) to our bank here. Our home bank would also charge a fee for the incoming wire. The conversion rate was just what parties decide to charge (or think they can get away with). -- that is, the UK bank could give us pretty much any rate they wished at the time the conversion occurred. In retrospect, that was a pretty poor business methodology for us, but it had never occurred to us that we could do better.

With an XEtrade account the methodology and the results are very different. After creating the XEtrade account, I set up the USA bank as a wire beneficiary and the London bank as a wire source of funds. XEtrade is up 24/7, so I can initiate transactions at any hour. I identify the amount I wish to transfer and the source and target currencies, then select the source bank and the beneficiary bank from my pull-down lists. The site immediately quotes the exchange rate and the wire transfer fee. When I submit the transaction, a print-out is produced that I can fax to my bank in London.

Now, here's where the magic happens. My bank in London does not do a conversion and does not do a foreign wire, both of which are expensive. Instead, they wire funds in pounds sterling to another London bank, an account tied to XEtrade with a unique transaction number that identifies my entire funding process. It is a local wire.

Take Control of Your Foreign Affairs, Part II

- By Renee Roberts

No need to wait in line at the bank.

XEtrade performs the conversion at the rate I agreed to on XEtrade's website, at no extra charge. United Kingdom pounds become US dollars. From there, the funds in dollars arrive at a New York bank and are wired locally to my bank. From my US bank's perspective, a domestic wire in US dollars has arrived, and so I am not charged the higher foreign wire transfer fees, nor subjected to their draconian currency conversion rates or their iffy foreign exchanges services. I've saved high fees at both ends of the transaction, in addition to receiving a far better exchange rate. I've also simplified the transaction for both the sending and receiving banks, reducing the probability of errors.

If you are not in a big hurry and don't mind waiting a few extra days, the entire process can be virtually fee-less. Just today I purchased some books for our store inventory from a foreign supplier. It is simpler and much less expensive to offer a supplier payment in their own currency, as I did in this case using a bank draft.

I set up my USA account as an EFT account through XEtrade and let them draw the funds direct after an online trade is made. Once they have the dollars they convert to the foreign funds, at the agreed-upon rate, and then they create a bank draft in the foreign currency (in this case, Canadian dollars) which they send to my vendor. I am able to perform this function entirely online and during off-hours. I send an email to my vendor letting them know how I am planning to pay. There is no extra charge for EFT draws or bank drafts, and XEtrade guarantees that they are giving me the best exchange rate.

The reason they can do this, Steven Dengler explained, is that my small transaction is aggregated with those of many other large companies. Therefore instead of getting the take-it-or-leave it bank rate, or the credit card rate, or the let's throw a dart at the dartboard rate, I receive the service very competitively, without the rip-off fees. And, what's more, I can do all of this at my convenience, on my computer, at any time.

I can set up any vendor that I do business with in this way, so that future transactions are quick, and I can use multiple funding sources -- thus far, our US- and UK-based banks. As we expand to other countries, I expect that we will add other bank accounts and other vendors as well.

I should also quickly mention that XEtrade solves the forward transaction problem -- how do you guarantee an exchange rate with a certain, future sale that will take place during an indeterminate period. The answer is to create a similar transaction, but this time with a 30-day (or even a year!) period, guaranteed at the quoted rate.

Take Control of Your Foreign Affairs, Part II

- By Renee Roberts

Get more Euros for your Dollars.

I admit that all of this is not psychologically easy. First of all you have to get past the language barrier: the heart of every transaction is not a book purchase but a currency "trade". A "beneficiary bank" is the bank that is receiving the converted funds. A "draft payee" is a person or business receiving a check in converted funds. An "EFT Bank Account" is a bank account from which you permit XEtrade to pull dollars to be converted.

Then, there is the trust thing about sending all of your personal information to a new company, as well as setting up your bank accounts to send and receive funds, but this is really no different than opening an investment account.

I recommend starting simply: use the XE.com site for calculations, then when you're comfortable and ready, move on to XEtrade, open a free account, and try a straightforward bank-to-bank wire transfer via a "Basic Trade".

I asked Steven Dengler about XEtrade's business model -- how does XEtrade make money? The answer is through the exchange rate, by charging a small amount in the spread above the actual cost of making the trade. In comparing his business to the banks and credit card companies, Steven said, "Some businesses rely upon an ignorant consumer base; we rely upon a well-informed consumer base."

We work too hard for the money we make, so we are choosing to be members of the latter, not the former group.

Renee Magriel Roberts can be reached at renee@roses-books.com.