For many Indian small and medium-sized enterprises (SMEs), growth means selling to new markets and buying from overseas suppliers. But every international transaction brings hidden costs: bank markups, fixed fees, routing charges, and time delays.
These nibble away at margins and increase working-capital pressure.
This article explains practical, high-impact ways Indian SMEs can reduce foreign-exchange (FX) costs on international business payments for SMEs, with real stats to guide decisions and a clear 30/60/90-day action plan.
The Hidden Cost Problem: What Really Eats Margins
Before you try to cut costs, you must understand where they come from. Many SMEs think the nominal price is the final price but conversions, bank markups and per-transfer fees change that quickly.
Most consumer and business card issuers add a foreign-transaction or currency conversion fee on top of the mid-market rate; that’s a direct percentage lost on every cross-border payment or card purchase.
Beyond the rate markup, payment methods carry fixed and variable costs. Wires often include flat charges (e.g., $15–$50) and correspondent-bank fees; merchant/processor fees can be 0.5%–5% plus fixed cents per transaction depending on the provider and region.
These layers stack: a markup on a converted amount, plus per-transfer fees, plus intermediary bank charges, equals a surprisingly large cost per invoice.
Finally, timing matters. Slow settlement creates cash-flow drag.
Having to pre-fund foreign currency or wait long reconciliation cycles increases working-capital needs and operational costs.
How Big is The Problem? Numbers That Matter
Numbers make the FX problem real for leadership and help prioritize which corridors to fix first.
A global benchmark to keep in mind: the World Bank’s monitoring shows average remittance costs globally around 6% (varies by corridor and method).
While remittances and B2B payments are not identical, this figure is a useful gauge for how costly cross-border flows can be if you rely on high-fee rails. Use it as a benchmark when comparing provider quotes.
For SMEs, the practical implication is this: even shaving 1–2 percentage points off FX and processing costs materially improves margin on low-margin products and frees cash for growth.
Tactical Steps To Reduce FX Costs on Individual Payments
These are quick, low-complexity actions your finance team can start today to reduce immediate leakage on international business payments for SMEs.
- Prefer multi-currency business accounts. Receive, hold and pay in the currencies you deal with most. That avoids immediate conversion at the point of receipt and gives you flexibility on timing conversions.
- Negotiate transparent pricing. Ask providers to show the mid-market rate and their markup separately. If they refuse, get multiple quotes, delivered (net) rates matter more than advertised fees.
- Batch and schedule payments. Combine small invoices into a single transfer to reduce the number of flat fees. Establish payment runs (e.g., twice a week) and thresholds to avoid ad-hoc micro-transfers.
- Avoid Dynamic Currency Conversion (DCC). If offered payment in your home currency at the merchant, refuse DCC; it often adds a poor conversion rate and a built-in fee.
These tactics are fast to implement and can cut costs immediately without complex systems change.
Process And Technology Changes That Scale Savings
To lock in savings as volumes grow, SMEs should adopt process and tooling changes that remove human friction and capture better FX rates.
- Adopt specialist cross-border platforms. Fintechs that use local rails, pooled liquidity, or optimized routing typically deliver better delivered rates than legacy banks for many corridors.
- Automate simple hedging for predictable flows. If you have predictable export receipts or recurring supplier payments, use forward contracts or limit orders to lock rates for those exposures. Even simple rules (e.g., convert 50% of expected receipts monthly) reduce volatility and unexpected losses.
- Centralize FX decision-making. A small treasury or centralized finance owner can consolidate conversion decisions, avoid fragmented conversions at the country or business-unit level, and negotiate volume discounts.
These changes take a bit more setup, but their savings compound with scale and reduce operational risk.
Choosing Providers And Negotiating Smart Contracts
The right partner and contract terms remove many hidden charges but you must ask the right questions and benchmark delivered rates.
- Compare delivered (net) rates, not headline fees. Two providers can both say “low fee” yet deliver very different net exchange rates once markups and flat fees are included. Ask for a sample delivered rate on a typical invoice size.
- Match provider routing to your corridors. Some providers are great for USD–INR corridors, others for EUR or GBP. Choose providers with strong local partner networks in your main supplier and customer markets.
- Negotiate SLAs and volume discounts. If you can commit to predictable monthly flows, many providers will offer lower markups or capped fees. Ask for annual or quarterly reviews tied to actual volumes.
Good procurement discipline here converts bargaining power into real rupee savings.
Internal Policy And Cash-Management Practices That Protect Margins
People and policy matter. Small process changes can stop recurring FX losses.
- Invoice in your preferred currency when possible. If a buyer will accept INR, invoice in INR to avoid conversion risk or give the buyer a currency choice and let them decide who bears conversion.
- Set conversion thresholds and approvals. Require approvals for conversions below set amounts; automate where possible so small, expensive conversions don’t happen by habit.
- Educate procurement and sales teams. Simple awareness (e.g., decline DCC, prefer bank transfers via low-cost rails for invoices) prevents avoidable costs.
These governance steps create discipline that protects margins over time.
Measurement: KPIs To Lock in Continuous Improvement
Track the right metrics to prove savings and keep momentum.
Track at least three KPIs:
- Realized exchange-rate delta vs mid-market (how many basis points you lose on average)
- Cost per cross-border payment (fixed + percentage as a share of invoice)
- Days to settle / reconciliation time (cash-flow and operational efficiency gains).
Regular reporting makes improvements visible and repeatable
30/60/90-day action plan (quick wins + pilots)
A short, staged plan helps leadership approve and finance teams execute without big upfront cost.
- 0–30 days: Run a 90-day audit of past cross-border payments to identify top corridors and the highest per-transaction costs. Implement batching and switch at least one corridor to a specialist provider.
- 30–60 days: Pilot 1–2 providers on your top corridor(s). Negotiate delivered-rate transparency and volume discounts for the pilot.
- 60–90 days: Implement centralized rules (thresholds/approval), set KPIs, and roll out multi-currency accounts where pilots showed clear savings.
Conclusion
Start with a short audit to find your biggest leak, a single corridor or supplier usually gives the fastest ROI.
Even modest improvements (1–2 percentage points) compound across invoices and lower working-capital needs, freeing cash for growth.
Use the benchmarks in this article, typical foreign-transaction markups and global remittance averages to evaluate providers and measure progress.
