The world is simply more global in nature with overseas travel, living, investing, and working arrangements becoming commonplace.
In today’s competitive banking environment, it is essential that community banks and credit unions stay ahead of the curve with the accelerating changes impacting their customers and ultimately their continued success. One of the biggest trends impacting society at large is increased globalization. This holds true whether the customer is a typical consumer, small business, or a larger corporation. The ability to offer international payments is an integral “piece of the puzzle” to best service a broad spectrum of people in today’s world.
How small business went global
Small business is the cornerstone of the economy but both starting and maintaining a company is a constant challenge. Community banks and credit unions have long been a lifeline to entrepreneurs who may not have been able to gain the credit and support needed for this endeavor at larger financial institutions. Today’s small business frequently have challenges and are competing with big box retailers, well-known chains, and ecommerce giants, all of whom have larger resources at their disposal.
One of the major reasons why many turn to international markets is expanded consumer access. Almost 96% of consumers live outside the US and expansion helps increase revenue and moderate local downturns and other fluctuations in sales[1]. Depending on the industry, selling to a non-US market might be the only way to survive, especially if the product or service is seasonal or niche.
With a plethora of digital support, it’s never been easier – or cheaper – for local operations to sell around the world. In fact, the US Small Business Administration suggests that American entrepreneurs consider hosted ecommerce platforms, like Shopify, marketplaces like Amazon and eBay or social media like Facebook[2]. Once smaller organizations expand their sales to new markets, they will need their financial institution to assist in managing foreign payables and receivables.
The surprising side of importing and exporting
An important reason for international transactions is that it is inherent for companies that import or export products to and from the US. This group is comprised primarily of small businesses and entrepreneurs. In fact, a whopping 98% of American exporters are small and medium-sized businesses, including family farms who export one quarter of their products to another country[3]. Community financial institutions are frequently involved in supporting their credit needs, including providing the working capital needed for small businesses launches. In fact, over one third of all small business loans are maintained by community banks and credit unions[4].
Why families need to send money abroad
It won’t surprise any financial leader that America is home to more immigrants than any other country on earth, with about 1 in 5[5] globally choosing to settle in the US. It is understandable then that more funds are sent internationally from the US than any other country – even during the pandemic, the amount was $68 billion[6] in 2020 alone. This is a major source of income for financial service and remittance providers that move these funds, especially since many regularly send portions of their paychecks to support relatives from their home countries. In fact, these amounts can be a large percentage of an emerging economy’s GDP.
Expats: The rising number of Americans abroad
While remittances are often the most popular international transaction, they are far from the only type. With the rising cost of both home ownership and retirement in America, many are considering foreign options. With the high value and stability of the US dollar, living overseas is an attractive prospect for a growing number of families and individuals.
In fact, even excluding military personnel, 8.7 million Americans presently live in 160 different countries, a number just slightly below the entire population of New Jersey[7]. These individuals may manage US transactions including accepting US retirement funds, paying foreign mortgages and paying tuition, among other functions.
How credit unions and community banks can adapt
While it may not seem obvious, today’s banking customer is in need of international services for both personal and professional reasons. The world is simply more global in nature with overseas travel, living, investing and working arrangements becoming commonplace. Newer technology and increased competition are causing small businesses, which have historically relied on credit unions and community banks, to purchase and sell overseas with greater frequency. Families too are sending money to relatives in other countries and themselves choosing to live or study around the world. For financial institutions wishing to keep up with customer demands, providing competent international services has never been more critical.
Contact a financial institution’s expert
[1] Source: Small Business Administration: https://bit.ly/3s18vNV
[2] Source: Small Business Administration: https://bit.ly/3A7G9ED
[3] Source: US Chamber of Commerce: https://bit.ly/3lsjKOd
[4] Source: Federal Deposit Insurance Corporation: https://bit.ly/3rUvWIK
[5] Source: UN: https://bit.ly/3ypD6Y3
[6] Source: The Wall Street Journal: https://on.wsj.com/3jkRXN3
[7] Source: AARO: https://bit.ly/3yw8ZOI
Disclaimer:
Convera has based the opinions expressed in this webpage on information generally available to the public, and such information or opinions are strictly for illustrative purposes only. Business between you and Convera shall be governed by the applicable terms and conditions provided to you before you undertake any transaction or commercial relationship with Convera.
