Multi-currency accounts: How they work + pros and cons

A multi-currency account enables users to hold funds in multiple currencies. For example, a multi-currency account could hold £2,000 and €3,000.

Regardless of the industry, an increasing number of businesses are operating globally. In fact, over 70% of PayPal merchant accounts send and receive cross-border payments.¹

As a business grows, working in multiple currencies can quickly transition from a minor inconvenience to a significant drain on a financial team's resources. Multi-currency accounts can help eliminate this problem, allowing businesses to receive, transfer, and hold funds in multiple currencies.

Keep reading to learn how these accounts may help businesses manage their finances, maximise funds, and streamline financial operations.

Table of Contents

• What is a multi-currency account?
• What are multi-currency accounts used for?
• Benefits of multi-currency accounts
• Challenges of multi-currency accounts
• How to open a multi-currency account

What is a multi-currency account?

A multi-currency account is a service that allows users to hold funds in multiple currencies. It could be very beneficial for international businesses as they can easily make conversions without needing to manage multiple accounts.

For example, if a UK-based business with a multi-currency account earns $3,500 from customers in the United States, they could keep those funds in the account as USD, saving them to pay American contractors or waiting to convert until the exchange rate is better.

Business owners can rely on their multi-currency account for a comprehensive snapshot of their finances, eliminating the need to check balances separately. Depending on the provider, this can also save users from paying conversion fees, simplifying online payment processing, bill payments, and more.

What are multi-currency accounts used for?

Multi-currency accounts can be extremely beneficial for individuals or businesses who frequently send or receive payments in multiple currencies. This can include:

• International businesses: Any business with suppliers or customers in multiple countries can use multi-currency accounts to manage income and expenses.
• Frequent travellers: Those who frequently travel abroad can use multi-currency accounts to reduce conversion fees and manage spending in multiple countries.
• Foreign property owners: People with companies, warehouses, or storefronts overseas can manage income more easily with multi-currency accounts and reduce the financial impacts of currency fluctuations.
• Foreign tuition payments: If a company sponsors foreign education or employee training, multi-currency accounts can be quicker and more cost-effective than wire transfers.

Benefits of multi-currency accounts

Multi-currency solutions may help businesses expand globally, making it easy to find new customers abroad while maintaining financial oversight. Online multi-currency accounts specifically benefit businesses by supporting:

• Lower conversion expenses: Businesses can hold payments in multiple currencies and use those funds to pay international expenses, reducing frequent conversion costs incurred with traditional, single-currency accounts.
• Straightforward pricing: Multi-currency accounts may offer more consistent cross-border fees compared to other solutions, enabling more accurate financial forecasting.
• Faster processing: Multi-currency accounts can typically transfer funds in just one to two days, compared to the three- to five-day timeline that's typical with international wire transfers.
• Local payment enablement: Many multi-currency accounts provide local account details so users can accept local payment methods from suppliers and customers.
• Rate volatility protection: With a multi-currency account, businesses can hold funds in a foreign currency and wait to convert funds until the exchange rate is more favorable.
• Liquidity: Multi-currency accounts enhance financial visibility, reducing the need to manage multiple accounts and improving cash flow management.
• Centralised management: With a multi-currency account, companies can keep foreign and domestic financial operations in one place. This makes it easy for teams to monitor finances holistically.

Challenges of multi-currency accounts

Multi-currency accounts can simplify a business's financial processes, but there are some potential drawbacks. Keep these factors in mind when considering opening a multi-currency account:

• Rate tracking complexities: Financial professionals must monitor exchange rates closely to convert funds at advantageous times.
• Legal and regulatory demands: Those managing multi-currency accounts must remain compliant with multiple jurisdictions, which can complicate income reporting and tax compliance.
• Cost fluctuations: Although multi-currency accounts generally offer fewer fees, businesses must monitor custodial fees, exchange rates, and market conditions to continue reaping the benefits.
• Low interest rates: Multi-currency accounts typically offer lower interest rates than other options, meaning businesses holding large sums of funds may not earn as much interest.
• Currency value volatility: Because multi-currency accounts don’t automatically exchange currencies for incoming funds, they're subject to market volatility if one or more currencies have a lower market value.
• Transaction limitations: Many multi-currency accounts have more restrictions on transfer frequency, transaction volumes, or other activity, which can pose significant challenges for businesses with large or frequent transactions.
• System compatibility issues: Accounting and financial planning systems often lack compatibility with multi-currency accounts. This can make switching to this type of account difficult for businesses that don’t have the resources to develop custom integrations or new financial processes.

However, with the right tools, businesses can conquer payment challenges and reap the benefits of multi-currency accounts.

Trust PayPal for cross border transactions

See how PayPal Open can help businesses take control of their global financial operations:

• Easy-to-use platform: PayPal's platform is intuitive, enabling global transactions with just an email address. Set up custom integrations or link an account to receive payments in multiple currencies.
• Securely and reliably executed transactions: Authorisation rates for PayPal are up to seven percentage points higher than market rates in the UK, resulting in fewer delays in global transactions.
• Integration with existing PayPal business tools: Keep all business tools in conversation with each other. PayPal Business accounts can integrate with low friction with your business tools for an integrated payment strategy.
• Wide range of supported currencies: With a PayPal Business account, businesses can accept payments in 140 currencies, receive funds in 57 currencies, and hold funds in 24 currencies.
• Customer support: Our team can help with complex queries and provide expert tips on maximising the benefits of PayPal tools.

For any UK-based business, PayPal Business accounts are an easy way to help streamline financial reports and maximise global revenue.

Get started today to accept payments, create invoices, and manage business finances on one easy-to-use platform.