While there’s no hard-and-fast rule about which model is better, as businesses expand and mature on the global spectrum their need for an integrated banking system will increase, and in many cases, become a critical component of an efficient and successful business.
A decade ago, many US businesses were leveraging multiple regional or local banks when expanding abroad. This option allowed companies to leverage local expertise—in areas such as supply chain, consumer environment and regulatory matters—which, during initial expansion was considered a valuable benefit to the local model.
However, many companies found that decentralized banking models led to inconsistent pricing relationships that varied from bank to bank, and country to country. Companies operating in numerous countries—even within North America—often experienced additional inefficiencies such as:
Today, many US businesses operating internationally continue to leverage numerous local banks. But as global financial institutions have improved their international services—including developing more sophisticated technology to serve cross-border clients—the gap between international and local banks delivering local expertise has closed.
Over the past few years, many international banks have invested in developing dedicated local banking groups with decision-making capabilities and on-the-ground knowledge of the region’s consumer and logistical landscape. Shifting to this business model has resulted in better client communication and an increased level of automation to manage multiple accounts in multiple currencies.
Integrated international banking models operate on a single platform, which immediately reduces duplication and allows for better pricing control and more consistent processes. Over time, companies may also realize cost savings by consolidating transactions and leveraging relationships with their vendors (including financial partners) to reduce their transaction volume and, in turn, the fees associated with those transactions.
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