Export from India makes up a big part of the Indian economy.
Indian travel agencies
Indian travel agencies often face problems when handling payments. It's cumbersome for customers to make international payments and the currency exchange provided on international transactions are usually far from ideal.
How B2B Pay became the Trusted Partner for Premium Indian Travel Agencies
“When we started, we didn't know that Travel agencies would be our number one customer segment” say CEO, of B2B Pay Neil Ambikar. B2B Pay offers virtual bank accounts in Europe for Indian companies who have European customers. Our customers are able to collect bank transfers directly in Europe which cuts down the fees by 80% and at the same time builds trust with their customers. Europeans prefer to make domestic payments and feel a bit scared of sending money overseas.” Initially a majority of our customers were IT outsourcing companies and manufacturers from India. B2B Pay soon had a lot of queries from high end Indian travel agencies.
Problem faced by travel Agencies
Package tours or conferences at the high end can range from €5,000 to €50,000. The problem in the industry is about trust. Travelers are vary about the thousands of travel agencies which can be found online. When they finally see a deal they like, sending a large amount via a bank transfer to an overseas country like India is complicated and very expensive. Currency conversion plus payment fees are around 5-6% which equals to thousands of Euros. On top of this there is the fear that they will make the payment and the payment will either get lost or the agent will disappear. The biggest fear customers have is hearing from the travel agency “we haven't received your payment.”
How using B2B Pay builds Trust between Travellers and Tour Operators
B2B Pay offers a very simple product: a bank account number in Europe for Indian travel agencies. Customers can now send Euro payments to European accounts. “When you tell a customer that you have an account in Europe to receive payments in Euros it immediately adds to the trust and gives them comfort that you are professionals and not going to run away with their money“ says Vijay, a travel agent from Delhi. “They now immediately agree to make the payment, while previously they would hesitate and make excuses that they needed to check with their bank.”
Tight Margins and Competition in the Travel Industry
With websites like bookings.com and expedia profit margins for tour operators are very much under pressure. “We used to easily spend 10% of our revenue on credit card processing, currency conversion and bank charges. Now with B2B Pay for our European transfers this is down to 1%” says Hemant.
The Indian economy
Asia is the largest piece of land in the entire world. It includes behemoth countries like China, India and parts of Russia. The entire population of Asia makes up for about 60% of the world’s population. Asia includes more than 50 countries that vary in their economic prowess, from enormously rich, to awfully poor. India is the economic behemoth of South Asia. India, a population of over 1.2 billion souls, incorporates a mini silicon valley in Bangalore and a mammoth cinema industry in Mumbai among other things. But these 2 items are not even close to being India’s largest exports. In the international market, imports and exports play a huge role in determining the growth and prosperity of countries. This barter transaction between countries often involve one country wilfully giving away some of its items to another country in exchange of something that is owned by the other country. This is how the world operates.
India's main export sectors
India, being the mini super power in South Asia, has numerous exports that earn her significant amount of money, these are;
10. Cotton
Considering the fact that India is an agricultural country, which means most of agricultural products take the cake in terms of its exports. So there should not be any surprises to see cotton so high in the league
9. Iron
Mining is the favorite pastime of Indian overlords, they do not excavate inside these mines themselves obviously, but they pay a lot of workers to dig up valuable stuff from beneath the surface of the planet. Iron being one of them, which is why Iron ore is 9th in our table of India’s greatest exports
8. Radio Equipment
Believe it or not, India is one the frontrunners that provide the world with most amount of broadcasting whiz. That is why, it is India’s 8th largest export.
7. Diamonds
Was there ever a question that a country famous for one of the most expensive wonders of the world would not be producing Diamonds in enough quantity to export them abroad?
6. Saps
India is also very high up in the rankings of countries exporting vegetable syrups, no surprises there.
5. Cars
There are numerous business tycoons in India that have taken up the responsibility of making India diverse. One of them is Tata group of Industries, because they are the reason why India exports so many cars.
4. Rice
Once again, an agricultural product very high up in the list of India’s most valuable export.
3. Pharmaceuticals
What are saps ultimately used for? You guessed it right, it is used in the formulation of pharmaceutical products and medicines, hence the link.
2. Jewellery
The land which is famous for its history of dynasty after dynasty of kings and Maharajahs, it is not a surprise to see jewellery as the second largest export of India.
1. Refined Petroleum
Surprise! India’s biggest export? Petrol in its finest form.
How to export to Europe? An Indian SME perspective
In India, there is a different criterion for Small and Medium level enterprises. A law was passed regarding the detection of small and medium businesses in 2006, known as the Micro, Small and Medium Enterprises Development Act (MSMED). A micro enterprise is defined as one whose machinery does not exceed 25 lakh. A small enterprise is defined as one whose machinery is between 25 lakh and 5 crore rupees. Finally, a medium level business is defined as one whose machinery costs 5 to 10 crore rupees. The SME sector of India prospers because of the exportations it conducts throughout the world. While large companies find it usually smooth to export goods and services to other countries or places, such as Europe, small and medium level businesses find it comparatively difficult. There are many reasons why this happens, some of these are;
- Tariff barrier
- Governmental regulations
- Price of commodity
- Market access problem
- Informational barrier
- Legal and political barriers
- Custom procedure and licensing
- Import quotas of destination country
- Industrial property rights of copyrights
- Currency Exchange rate
- Transportation cost and duration
- Working Structure/Schedule of the targeting country.
B2Bpay.co is a firm that specialises in providing its customers easy options in their quest to export goods and services to Europe. A merger of three pioneers from India, Netherlands and Brazil, the b2bpay.co is one of the fastest growing and the most trusted medium when it comes to helping SME owners in India to facilitate transactions and exchange of services and goods with other countries, especially the European Union. B2bpay.co provides its customers with up to 80% off in service charges as compared to local banks. It also maintains a steady exchange rate that can save you millions, and we all know that if you are an owner of a small or medium level business, millions are a huge number.
Requirements
Before exporting to Europe, investors need to understand how the trade system is set up in Europe, and they also need to familiarize themselves with procedures and documents like
- EU product classification system
- EU import procedures
- Documents for Customs clearance
- EU Customs Union
- Value Added Tax
- Excise Duties
Apart from that, your product must meet the European standard of safety to humans and animals alike.
Tariffs
Another existing particle in trading to Europe is tariff. A tariff is a tax or duty which is associated with your products that cross political borders. Import tariffs are applicable too (In case you are importing). In order to fully understand the concept of tariffs, exporters need to familiarize themselves with the following; Legal Basis General Info BTI application form Customs inventory Customs Authorities AGREEMENTS: There are different agreements for different trades, there is no “one size fits all” philosophy being followed. However, in most cases the European Union negotiates free trade agreements, a.k.a. FTAs. There are two types of FTAs; WTO Preferential Agreement
WTO agreement
In this, the European Union acts as a single body that sets up the protocols and standards for trade procedures. Although, every country in the EU has the right to set special rules and standards, but as common ground, EU decides the basics. In short, when there is talk about representing European countries at global stage, each country does not individually represent itself; rather the European Union represents everyone.
Preferential trade
These are described as special and privileged agreements. For instance, a European country that is also a member of EU decides to grant special concessions and perks to exporters from a specific country (say India). It is true that preferential agreements do help in the smoothening of export, but it still needs to be within the required standards of the EU. After checking all the requirements that are a must for any exporter to export goods and services to EU, understanding the tariff rates for different countries in the region and after setting up an agreement plan (as applicable), investors and small business owners from different parts of the world, including India, can easily expand their horizon by exporting and expanding their products to different nations in the European territory.
Top 5 tips to boost Indian exporters profits by 20%
Small to medium size (SME) exporters already know how much pressure globalisation puts on staying relevant and competitive. The financial crisis and the drive for ever lower costs hurts SME exporters more than any other business. This trend has been particularly hard on IT and pharmaceutical manufacturers, two big export sectors in India. This article doesn’t try to reinvent the wheel or provide a lecture on global economics. We just look at some of the easy wins SME exporters can use to increase profits without much effort.
Top 5 tips to increase profits without breaking a sweat
Here's a list of 5 relatively easy things you can do to boost your profit margin:
- Shop around for Letters of Credit
- Save on logistics
- Shipping insurance
- Cheaper financing
- Save on international bank transaction fees
Now we take an in-depth look at each of these.
1. Shop around for Letters of Credit
It is normal for an exporter to ask for a Letter of Credit from their potential customers. Letters of credit are an important tool of trade where it provides an exporter with confidence that if they send goods to their customer, they will actually get paid. But once again an L/C is very expensive and is eating into an exporter's profit margin. Look into alternatives. Some insurance companies offer payment protection for example Euler Hermes, a subsidiary of Allianz insurance. Basically if your customer in Europe fails to pay you, they will make the payment to you and take legal action against your customer to recover the payment. Another option is to sell your invoice to a recovery firm which will use legal means to recover payment. The second option can be expensive as a Letter of Credit but you only need to use it if your customer doesn’t pay. Savings: Hard to quantify. A letter of credit can cost anywhere between $300 to many thousands. Depending on the risk profile of your customer you can save 80% of the cost of the Letter of Credit.
2. Shop around for a logistics companies
Shipping costs is another area where if you shop around you can easily save a lot of money. Luckily a lot of startups are also innovating in this space. Below are some startups innovating in this area:
Savings: In one of my searches the difference between the cheapest and most expensive was about 50%. Depending on what your shipping agent charges, you can save up to half of your shipping cost. Obviously you also need to take into account various other factors other than just cost. Provided coverage and service may be more important for you than the cost.
3. Shipping insurance
To get shipping insurance you no longer need to go to your local agent or local bank. You can access the global markets through some fintech startups. Getting access to global prices means that you can access the best and cheapest shipping insurance companies in the world. The aforementioned Freightos is a startup in this space that also does insurance. Savings: Shopping around for insurance rates will save you between 10–30% on your insurance bill. Read more about shipping insurance here.
4. Get cheaper working capital and short term loans
When you borrow from a local Indian bank the cost per annum is anywhere between 10-16% for short term and working capital loans. As an exporter you are in the position to access global markets. You can try and access your export market to get cheaper working capital and short term loans financing to the tune of 4–5% per year. There are three ways you can do this.
- Discount for paying early. Offer a discount to your customer for paying early. This is nothing new but with the low interest rates in Europe right now. Your customer will be tempted to pay early as their borrowing cost from their European bank will be to the tune of 2–3% per year!
- European loans. If you have been exporting for some time to Europe you can approach local European banks to provide you with a loan. Even with added risks banks will be able to provide trade finance in the range of 4–6%.
- P2P lending is the latest innovation for borrowing money for SME exporters. You can sign up on P2P lending platform and ask for a loan. Depending on your risk profile lenders on the platform will offer you a loan for a set interest rate. Check this article on livemint.com if this can work for you.
Note: Take the FX risk into account with options b. and c. FX risk is real and you need to decide whether it is worth the risk as the loan will be denominated in euros or you need to hedge the FX risk. Savings: For Indian or Asian exporters this will be a cool saving of around 4% on the borrowed amount.
5. Save up to 80% in international currency conversion and transaction fees
The cost for international payments makes up nearly 3–6% of your export value even without you knowing it. (Shocked? Read this case study) Most of these costs relate to currency conversion and payment charges. For example when you ship goods to France and your customer pays you in USD or EUR the transactions goes through your customer's French bank which makes the currency conversion and international payment. The currency conversion charge alone is normally 3-5%. You can easily save on these fees by using the latest financial technologies. You're reading this on B2B Pay's website, we're a business based in Finland and Germany and we offer a service to collect money in Europe and transfer the money back to India in Rupees for a price around 80% cheaper than the current banking system. B2B Pay simply does this by automating the banking processes and making for efficient cross border payments through firstly SEPA within Europe and secondly by getting bulk pricing by aggregating transactions. Savings: 2% of the transaction value which for most exporters translates to a profit increase of 10% assuming your margins are around 20% of the export value. Example: on an invoice of €100,000 it will save you at least €2,000.