MANILA, Philippines—A significant segment of the country’s small and medium enterprises engaged in overseas trade continue to have limited options when it comes to paying for their transactions with foreign counterparts, international fund transfer firm Western Union said Sunday.
As such, many SMEs are forced to use pricey payment services offered by banks—an added cost that is eventually borne by end consumers in the form of more expensive products and services, company officials explained.
“About 99 percent of the importers we have in this country are SMEs,” said Patricia Riingen who is the regional vice president for Western Union in Pacific Indo-China. “Many of them are involved in cross-border trade to support growth locally.”
She explained that, for many of these firms, trading with foreign suppliers involves a cumbersome and expensive process whereby Philippine pesos must first be converted to US dollars, and then onto the third currency of the business partner abroad.
“There are costs involved for each step, as well as an unquantifiable cost in terms of time and convenience, which may be difficult for a smaller company to shoulder,” the Western Union official said.
To address this, the company said that will introduce a new service that will allow SMEs to short-circuit the international payments process through Western Union’s existing network of money transfer services.
“What we want to do is change the way international commerce is done in the Philippines, especially for SMEs,” Riingen said. “Instead of [converting] from pesos to dollars, and then dollars to another currency, SMEs will soon be able to make the payment directly to their suppliers abroad in their local currency, using Western Union’s network.”
The service, called Western Union Business Solutions, will be launched locally in partnership with Petnet Inc.—a longtime Western Union agent—to allow SMEs to settle payments with partners around the world within 24 hours.
“We can offer SME service delivery for global payments, with realtime exchange rates, through a network that operates in 200 countries and territories,” Petnet president and CEO Lorenzo Ocampo said. “This is a major breakthrough for small businesses in the Philippines.”
At present, he noted that the international payments system offered by the banking system is geared mainly for large corporations, in terms of cost and level of complication of the services.
Western Union’s SME-oriented service, however, aims to serve firms who make smaller payments, whether frequently or infrequently.
“And they will have the convenience and cost savings of being able to convert directly from pesos to over 140 currencies anytime they need it,” Ocampo said.
The service will be launched in the Philippines in the third quarter.