Australian SMEs are losing out on a potential $84 billion in collective revenue from cross-border trade, due to a lack of confidence in managing exchange rates, according to research conducted by OFX in conjunction with CoreData.
The new OFX Cross-Border Confidence Index revealed almost half of all Australian SMEs are feeling uncertain about the future of the local and global economies (40 per cent and 44 per cent respectively).
This uncertainty is leading to a confidence deficit, with a third (33.6 per cent) of SMEs who engage in cross-border trade claiming their lack of confidence has stopped them from trading internationally or dealing with overseas suppliers, impacting their ability to access additional markets and growth.
This is reflected in the cross-border confidence index number, which is sitting at 54.1 (of a possible 100 points). Overall current sentiment, based on the experiences of SMEs already trading internationally, indexed at 58.7 is considerably higher than anticipated sentiment (49.6), further illustrating SMEs’ uncertainty about the future.
OFX CEO, Skander Malcolm, said that despite their concerns, there are significant opportunities for SMEs.
“In initiating the Index, we wanted to understand how Australian SMEs are engaging in cross-border trade, look at the challenges they face, and identify opportunities to help bolster their bottom line through unlocking new markets and better ways to manage international payments,” Malcolm said.
“The cross-border outlook amongst SMEs is optimistic with the research showing a quarter (24 per cent) believe the volume of cross-border trade for Australian small businesses will increase over the coming six months. The findings suggest there is a growing appetite for global trade as an important growth channel and a way for small and medium businesses looking to weather economic challenges and come out on top. But in order for SMEs to take advantage of this opportunity, they need proper support,” Malcolm added.
“Australia, like much of the world, is facing an economic slowdown. Our research clearly shows that equipping SMEs to take advantage of cross-border trade opportunities could boost Australia’s financial outlook by $84bn and help the ‘backbone’ of our economy to thrive now and into the future.”
According to the research, one in three Australian SMEs (28.6 per cent) currently engage in cross-border trade. Of those SMEs, the majority (90.1 per cent) feel the same level of confidence or more confident than they did 12 months ago.
Many SMEs who aren’t currently trading internationally are interested in expansion – albeit with a caveat. More than three-quarters (78.5 per cent) of this cohort say they would be more likely to begin trading internationally if they felt more confident about foreign exchange markets.
Malcolm said building confidence in foreign exchange and cross-border trade is vital for Australian SMEs and consumers, particularly in an increasingly digitally-led economy.
“They need the ability to navigate uncertainty, have quick access to information, and troubleshoot issues by speaking directly to an expert who can help them to manage currency volatility. Understanding how to plan for market movements, create certainty and save money on international payments can make cross-border trade a growth-driving reality for any business,” Malcolm said.
The number one concern for Australian SMEs when it comes to foreign exchange transfers is being ripped off on fees (58.7 per cent), while a transparent fee structure (48.1 per cent) and the ability to lock in a rate in advance (39.1 per cent) are important elements for developing cross-border confidence.
