Reaching new markets with a local USD account

All companies looking for a steadfast growth channel turn to international markets. The US, an important market because of its size, is often at the top of the list for many companies.

That said, exporting to the US has its fair share of challenges, among which the need to open a local bank account. The hurdles imposed by US banks to open an account locally and to repatriate profits can be both complex and time consuming.

The somewhat complex ambition of exporting to the US 

Depending on the growth method chosen to distribute products and services, a company will face a number of obstacles, particularly with regard to the issue of collecting revenues (generated from sales in USD to US clients, both B2B and B2C).

To open a store on US soil, it is necessary to open a local account at a traditional US bank. This seemingly simple step can prove problematic for three reasons: 

• Application processing times can take several weeks, delaying the start of commercial operations;
• Application processes can prove particularly rigid as they require many guarantees and documents (including several identity cards and a proof of residence in the United States), and that’s without even mentioning the potential risk of applications being rejected which happens more often that one would think;
• Fees related to account opening and account holding tend to be relatively high and extremely opaque. Sending funds to Europe involves costly international transfers, and excessive fees are generally applied to any currency transactions.

It is also important to take into consideration the distribution network required across the 50-state US territory. To cover this gigantic market, companies frequently have to open several affiliates and create a local network. From a banking perspective, this has its consequences as separate bank accounts generally have to be opened for each affiliate. The constraints mentioned in the bullet points are multiplied by the number of entities present on the market.

As a result, the bigger the structure of local affiliates, the more bank accounts and intragroup flows there will be to manage, which is both complex from an accounting point of view and costly. Not to mention that these accounts will probably need to be aggregated or the funds repatriated. All these related transactions will also come at a cost.

The specific case of e-commerce and marketplaces

Besides the traditional case of companies that choose to expand by creating subsidiaries, others prefer to rely on the strength of marketplaces. Think Amazon, Walmart, eBay, Etsy, Target, Overstock, Mercari and many others.

This option is an excellent way of avoiding the challenge of creating a local distribution network from scratch, but it is not without its own constraints.

What happens at the payments level when selling through a marketplace? 

In reality, third-party payment modules, such as PayPal, Stripe and AmazonPay, are attached to these marketplaces. It is these payment service providers (PSP) that make it possible to execute the transaction: the client pays with its local means of payment (a US credit card for a payment in USD, for example), and the seller collects the revenues from its sales (on a local US account, a US account held abroad, or a EUR account held abroad, for example).

In all three cases, the seller will face constraints associated with the intermediary of PSP:

• For a simple payment to a local US account, the time required to receive these funds may be slowed, and the PSP will take a commission on this payment.
• For a payment to a USD account held abroad, the transfer will take time and the use of the international network will be costly, in addition to the commission charged. 
• Lastly, if the seller has no USD account but only a euro account abroad, they will not only face international payment delays and costs but also the drawback of having to pay an imposed and high conversion rate (between 2% and 5%).

The solution:  a local account in USD combined with the power of the iBanFirst network

At iBanFirst, we help companies expand internationally by making easy and possible everything that is complex and opaque elsewhere.

This is why we offer companies wishing to establish a foothold in the US market the possibility to easily open local USD accounts while benefiting from the power of the iBanFirst network to:

• Collect payments derived from local sales by using the faster and less costly domestic payment network, and benefit from free transfers and instantaneous conversion between its various iBanFirst accounts to make intragroup fund transfers or to repatriate these funds to a Europe-based parent company.
• Aggregate all accounts in a single space with a consolidated balance sheet on the iBanFirst platform.
• If a conversion is necessary, say from dollars into euros, the speed of the transaction and transfer will be optimal, as we always guarantee the lowest and fairest exchange rates.