A recent survey by Wise has shed light on the challenges New Zealand's small and medium-sized enterprises (SMEs) face in their efforts to expand internationally.
While nearly a third (30%) of these businesses are already operating overseas or planning to do so, they encounter substantial hurdles such as the cost of international payments (42%), complexities in regulatory compliance (41%), and the country's geographical remoteness (40%).
High Costs and Hidden Fees
A significant issue is the high cost of international payments. Most SMEs (59%) continue to rely on traditional banks for these transactions, citing convenience (54%) and trustworthiness (49%) as key reasons.
However, only 17% believe banks are the most cost-effective option, highlighting a troubling lack of transparency regarding fees.
Wise's research reveals that 91% of business leaders believe it should be illegal for banks to conceal exchange rate markups. These hidden fees, which often inflate costs significantly, have led many businesses to increase prices (41%), reduce investments (36%), and even cut staff salaries (23%).
Wise's New Zealand Country Manager, Tristan Dakin, emphasized the severity of the issue.
"The lack of understanding around fees is a huge problem. SMEs contribute a quarter of New Zealand's GDP, and inefficiencies in these processes have a massive impact on businesses and the economy."
The Need for Transparency and Alternatives
The research also highlights a startling knowledge gap.
Over half (52%) of SMEs planning international expansion do not fully understand what they are paying for, and 8% are entirely unaware of these fees. Among SMEs already operating globally, 39% spend over NZD $5,000 annually on international payment fees, while 28% of businesses believe they incur no costs or are unsure of the fees.
Speaking at a recent Wise event, Dakin elaborated: "Traditional banks charge Kiwi businesses anywhere from 3-5% of the total transaction amount when sending money overseas. These fees are often hidden in exchange rate markups, which is misleading and costly for businesses."
Colin Williams from Atria, a Wise user and New Zealand business owner, shared his experience.
"When I took over my business in 2018, I realized traditional banking fees for my international customers in Europe and North America would cost me a fortune," he explained.
"Switching to Wise saved me significant amounts—about $50,000 annually—and streamlined the process. With Wise, I can set up local accounts in minutes, ensuring payments are received quickly and at a fraction of the cost."
Barriers Beyond Banking
Beyond payment challenges, SMEs also face regulatory hurdles. Opening a bank account in another country through traditional banks is often a complex process.
Moreover, New Zealand's geographical remoteness remains a significant obstacle.
"While technology can mitigate some issues like international payments, regulatory compliance and geographical challenges require more systemic solutions. The data underscores the need for better support to help SMEs navigate international expansion," Dakin highlighted.
A Call for Government and Industry Action
Wise advocates for increased transparency in banking fees and greater awareness of cost-effective alternatives.
"Mandating transparent fees would be a positive driver for the market," he said. "SMEs deserve to know what they are paying for and have access to fairer, more competitive solutions."
Many SMEs turn to independent and government support agencies for guidance on international expansion, but reliance on these resources diminishes once businesses begin operating overseas.
Colin highlighted the role of local agencies like NZTE: "NZTE was incredibly helpful, but their resources often target businesses that have already achieved a certain scale."
"Smaller businesses might find it challenging to access this support early on."
