Posted by Allison on 5 April 2009, 11:03
Doing business between countries used to be something of a pain for the businesses involved – and while some aspects of it are still tricky, the introduction of the internet has made it possible for even the smallest, one man band businesses to trade profitably with people on the other side of the world.
The world really has got smaller thanks to the internet. If you had a small business many years ago your market probably would have been restricted to your local area. Then that area extended to the country, and now high speed internet connections have made it possible to sell goods all over the world, provided you are able to mail out the goods safely. Of course even that doesn't always have to be the case; if you can provide goods via download or email your customer can have their purchase in seconds.
But where does this leave the small business owner when it comes to processing payments? After all if your customer lives in Australia how will they pay you? Surely they would pay with Australian dollars wouldn't they?
Thanks to websites such as PayPal, receiving customer payments in currencies other than your own is quick and easy, and you don't have to worry about refusing a certain currency because you might not be able to exchange it either. This is a great system because it makes things easy for both the buyer and the seller, and it completely removes the problem you would have had previously of wondering how on earth you are going to pay for something that you have found on a Japanese website, for example.
If you own your own internet business or you are thinking of starting one, you will find it useful to become familiar with the current exchange rates. Just about the only risk you run of accepting payments in currencies other than your own is that the currency in question may suddenly become worth less than it was when it arrived in your account. To prevent this it can be a good idea to convert the currency from the foreign one into your own as soon as you receive it. You don't have to have a minimum amount in any currency to be able to convert it, and the beauty of PayPal is that they won't charge you to convert from one currency to another. All the world's major currencies – plus a few more besides – are accepted, making it easy to do business with people from all over the world.
There has been some talk recently about the possibility of every single country in the world adopting one currency, so there would no longer be any need for exchange rates, but is that really necessary if the world is moving more towards trading online anyway?
We've seen already that as far as internet savvy businesses are concerned, selling to other people in other countries doesn't pose much of a problem when it comes to taking payment in a different currency. But there is still the exchange rate to consider, although it has less of an effect if your prices are set in your own currency. It is then up to the buyer to make the conversion to your currency before sending payment, or for you to make the conversion from their currency into yours. You won't lose any money through fees.
There is certainly no doubt that technology has allowed small companies to compete on a global scale. If we ever do have a single world currency it is probably more likely to be a virtual one than anything else, and while many people are unconvinced of a single currency the idea of a virtual one may actually be more appealing.
Of course PayPal is not the only player in this field, although it is arguably the most well known thanks to its association with eBay. WorldPay is another company which is geared up to accept different currencies as payment, and in fact offers a much wider range of currencies than PayPal does. For most people PayPal will probably suffice, but if you find yourself selling goods to all kinds of countries then WorldPay may just provide you with an edge.
Part of the charm of selling online is being able to accept all kinds of payments from people in all kinds of countries. In this respect many sellers have found that being a member of more than one online payment processing services gives them an even better edge.
While you will ideally want to receive your payments in the currency you are used to, being able to offer customers the opportunity to pay in their own currency obviously gives you an advantage over your competition. Some businesses don't even consider mailing outside their own country, let alone accept payments in other currencies, so if you do both you will naturally tend to get more orders.
It is also nice to know that you don't need to have a degree in knowing about exchange rates and how different currencies work with each other to be able to take full advantage of the marketplace that is the entire world. That is quite a powerful edge to have in any business, and yet it is one that many people now take for granted, thanks to the internet and the power it has to invade people's lives in many different ways.
But what about digital currency? Where does this stand in the world of small business online?
In short it should really be avoided if you are running a proper business. While the idea of digital currency is a good one in theory, it is currently not advanced enough to be of any real interest to the serious business person looking to make their business accessible to as many customers from all over the world as possible.
A digital currency is generally bought and then sold on to someone else. The big difference is that once the transaction has been completed it is final and absolute. With an online payment system there is always a chance that a payment could be reversed and taken back out of your account for some reason – which could be a disaster for you, the seller.
Perhaps in time we will see the advent of a real, serious and legitimate online currency that will establish itself enough to be usable by big businesses. Until then we must stay with the current system which allows us to deal in different currencies without much of a problem and with no charges to boot.
It is certainly the case that anyone with an online business knows rather more about world currencies than they did some years ago, before the internet came into our lives. In this sense the internet has been an educational experience, and we probably all know a lot more about how different exchange rates are likely to affect us, especially if we do have a business.
Things would undoubtedly be simpler if we only had one world currency, but for now the mix of currencies that we can pay with provides something of an experience when it comes to buying and selling online.