Does the global banking system disadvantage translators? Can we fix it?

Is someone taking an unjustified cut from the payments you receive from your local or foreign customers? Do you always receive the full amount you are owed when you are paid?

Or is a proportion of your income disappearing into bank fees, forex commissions and other deductions? When you are paid in a foreign currency, do you assume that you are actually getting a good deal when the payment is converted to your local currency? Or are you paying exorbitant fees and commissions buried in the exchange rate (perhaps without even being aware of it)?

Your foreign customers will most certainly have paid a fee to send the money they owe you. But is the payment provider doubling his money by collecting a fee from both sides of the transaction – at your expense? Or after the sending bank has charged your customer a fee is your local bank getting in on the act by charging you another one just so you can get it into your account?

In a series of posts, I will look at:

  • Problems freelancers frequently face when getting paid by their direct clients or foreign translation agencies ;
  • Problems agencies encounter when getting paid by their customers; and
  • Problems agencies have in paying their geographically dispersed subcontractors.

… and more importantly, some practical ways we can solve some of these problems and put more money into translators’ pockets.

Translators in the global economy

Translators are the spearhead of globalisation… well, aren’t they? They’re the ones who make it possible for Japanese manufacturers to sell their cars in Ecuador, Dallas or San Marino. They’re the ones whose skills are required to put the commercial contracts of all sorts of cross-border services into the language of the buyer.

So, if translators are helping everyone else enter a lucrative and expanding global market, how come they find it so difficult to take advantage of the same sorts of international opportunities themselves? After all, the multilingual global marketplace is the translator’s natural environment – why shouldn’t it be as easy for translators to do business globally as it is to do business at home?

The small guy and the big banking system

One of the major obstacles in the way of individual translators and small and medium-sized translation companies fully participating in the global marketplace is the nature of the international banking system – a system  built for bigger players.

For really large transactions between suppliers of goods in one country and buyers in another there are many financial instruments such as letters of credit and insurance arrangements which ensure that the seller gets paid.

But what about small businesses and individual professionals like translators? They also need to trade globally and to get paid across national borders. But freelance translators typically get paid in relatively small amounts, like €50, €500 or €1,000. There are no safety nets for small players like these who want to take on new foreign customers. To get the work, they have to carry the full risk of not getting paid. And when they do get paid, it’s often at a high cost.

The cost of transferring millions of dollars across national boundaries via the international banking system is tiny in comparison with the huge amounts being transferred. But relative to the small sums earned by translators the cost of transferring money between currency zones can be huge.

There are many options for transferring money across national borders and currency zones – and the cost of different methods can differ wildly. Foreign exchange and money transfer companies can provide currency exchange rates that beat the banks. But you typically have to be sending more than £5000 across currency zones to find a foreign exchange company who will not charge you a hefty transfer fee. The average small translation company who pays out lots of relatively small amounts to their freelancers is probably losing money every time it sends money abroad because of poor exchange rates and high fees. And often, it’s the solo professional translator at home who ends up paying for it all.

An uncertain economic climate

While the translation industry is currently growing at an estimated 12.7% [1], the uncertain economic climate is putting pressure on small translation businesses – freelancers and LSPs alike. Chasing the cash they are owed is often a challenge for an increasing number of small business owners. Customers not making payments on time – or not making them at all, is a growing problem according to a recent survey [2].

In 2008, only 2% of small business owners said getting paid was their most challenging problem. That figure jumped to 12.8% in 2009 and continued to edge up to 14.1% in 2010, the most recent year the data is available.

Can something be done to make cross-border trading for translators as easy, safe and inexpensive as doing business locally?

Or is this just a pipe dream?

Maybe not…

In my next post I look more specifically at how international money transfers affect translators. I report on a small survey I conducted to gauge how solo translators and small translation companies feel about getting paid and the particular problems they face.


Notes:
[1] The Language Services Market: 2012, by Nataly Kelly, Donald A. DePalma, Robert G. Stewart  Common Sense Advisory, Inc., http://t.co/3VYFdQKI

[2] Kauffman Foundation, a Kansas City, Mo., research organization focused on entrepreneurship, http://www.entrepreneur.com/blog/223538

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5 Responses to Does the global banking system disadvantage translators? Can we fix it?

  1. Excellent post, and I look forward to the rest of the series. I live in Australia, but most of my clients pay me in euros into my UK bank account. Then I use a money transfer company to send it over to Oz. Obviously, this means I’m losing out on several levels with each transaction, but I haven’t found a workable solution yet. So I very much look forward to your next post! 🙂

  2. Pingback: The Banks vs. Translators: What do freelancers think about how they get paid? | The translation business

  3. When I started working in London, I was surprised that the banks in the UK charge you a fee for receiving money from other countries when the sender pays the exchange rate in their bank and sends the money in GBP. Even the Bank’s Business Account Manager thought it didn’t make sense to pay a commission for receiving money. My bank in Spain allows me to send money to other EU banks and, of course, receive money, without charging any rates.
    Then there is Paypal who also charges a commission for receiving payments!
    It sure is expensive for a small business to trade with other countries and currencies due to the big banks.

  4. Pingback: The Banks vs. Translators: What do freelancers think about how they get paid? | Translator Pay

  5. Pingback: Weekly favorites (July 9-15) | Adventures in Freelance Translation

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