A new report from Aite Group explores the local-currency payments market and discusses key factors driving US middle-market importers to pay non-US-based suppliers in their local currency. The report is based primarily on the results of a December 2010 Aite Group phone survey of 100 US-based middle-market importers with between US$50m and US$250m in annual revenue.
Aite Group estimates that approximately 40% of US middle-market importers with between US$50m and US$250m in annual revenue have non-US trading partners; approximately 78% of those businesses make international payments for the purchase of raw materials. This level of international payments is driving demand for foreign exchange (FX) services as importers increasingly recognise the benefits associated with paying non-US-based suppliers in their local currency.
Approximately two-thirds of US middle-market importers that conduct business overseas currently pay all or some of their foreign suppliers in their local currency. The remaining one-third may be missing out on opportunities to lower their risk, negotiate better pricing, and build goodwill.
“There are several benefits associated with paying overseas suppliers in their local currency,” said Christine Barry, research director with Aite Group and co-author of this report. “While most importers recognise and take advantage of these benefits for at least some of their international payments, others continue to miss opportunities to negotiate better pricing and lower their exchange rate-related risk.”
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