Virtual Currency Accounts
What are FX receiving accounts and do you need one?
What Is A Virtual Currency Account?
Virtual currency accounts, receiving accounts, multi-currency accounts. You may have seen these words thrown around by FX brokers. But what do they actually do? Well, the answer isn’t all that simple, unfortunately…
The idea of a virtual currency account is to allow individuals or businesses to receive and/or hold various international currencies in one place, without having to open up a bank account in each country that you want to hold currency.
Most large banks have given the ability to hold different currencies for a long time, but there are some big differences between the old multi-currency accounts offered by the banks, and the new hybrid accounts being offered by some FX providers. Two notable differences are cost and fees associated with the banks and the physical locations of the accounts.
Types Of Multi-Currency Accounts
Virtual Currency Accounts
These accounts act as though you have a physical account in another country. WorldFirst World Account or TransferWise Borderless Accounts are good examples. They are great for businesses who invoice overseas or pay overseas suppliers.
For example, an Australian company might be doing business in the UK, but not have an office in the UK. It can prove very difficult to open an account in the UK without a presence there. Instead of having to invoice in AUD, this company could open a virtual account in the UK, which invoices can be paid into in GBP. The company is then free to return funds back into AUD at a great rate or use their GBP for other purchases.
FX fees and rates can massively eat into your margins when selling online overseas. Products like the WorldFirst Online Seller Account or OFX eCommerce account were specifically created to save money on this transaction.
Similar to virtual currency accounts, these accounts allow online sellers to receive proceeds from sale in local bank accounts and currencies. You can then exchange your funds at a great rate, or use funds to buy purchase inventory in the same currency! Bye bye PayPal fees!
Standard Multi-Currency Accounts
These are accounts, mainly offered by banks, in various currencies. The problem with these accounts is that they’re usually located in the wrong country. For example, you might have a Westpac account in Australia, and want to hold EUR to receive payments, but the EUR account will be located in Australia; so you won’t have an IBAN number, and there will be costs to receive funds.
Why Would I Need A FX Currency Account?
Doing Business Overseas
I’ve heard of business relationships ending because US businesses don’t want to pay into foreign accounts, and it’s very difficult to get a US account set up if you’re not in the US.
Running An Online Store
If you’re selling overseas on an online marketplace like Amazon or Shopify, you could be paying a huge amount in fees and rates to the likes of PayPal or Amazon Payments.
Freelancers working on sites like Fiver or Upwork can streamline their income through virtual accounts.
Individuals Or Business Receiving Money From Overseas
When it comes down to it, these accounts are for anyone looking for a better or cheaper solution to receiving overseas funds. FX brokers have made it cheaper to send money internationally for years, but receiving money has always been a lot more difficult. Virtual accounts may be the answer to your prayers!
What's The Best Product For Me?
Not all Multi-currency accounts are created equal! And knowing which one is best for your needs can be difficult, so here is a bit of information on what’s out there.