What Is a Local Currency Account? Benefits and Options

Whether paying overseas suppliers or receiving international payments from customers, you might have experience dealing with fluctuating exchange rates and costly transaction fees. 

A multi-currency account is one of the most cost-efficient solutions to streamline cross-border payments for your global business operations, especially if you frequently transact in more than one currency. 

You may have also come across terms like multi-currency wallets and local currency accounts and wonder, “What are the differences?”.

This article will guide you through what a local currency account is, how it's different from multi-currency accounts, its benefits, and how your business can benefit from having one. 

A local currency account allows you to deposit and manage funds in the local currency of a specific country. This account often includes essential identifiers needed for local transactions, such as IBAN for bank accounts in Europe and bank and branch codes for Hong Kong accounts.  

For example, opening a local bank account at a US bank provides you with an account number and a routing number, and you can only make deposits in USD. This account is considered a local currency account.

Traditionally, setting up such accounts required dealing directly with banks in each country. However, most fintech companies such as Airwallex, Wise, and Payoneer now offer virtual local currency accounts that users can open in multiple locations and conveniently manage within one virtual multi-currency wallet. 

Here’s an illustration of what it may look like:

Meanwhile, some financial service providers, such as Statrys, offer multi-currency accounts as local payment solutions. Similar to local currency accounts, multi-currency accounts allow streamlined payments in various foreign currencies but under a single account number, like this:

Although local currency accounts can simplify handling payments in different currencies, here are the key advantages and disadvantages to consider when considering their suitability for your business operations.

• Simplified Payment Process: Using local currency accounts for transactions with suppliers and customers within the same country helps avoid the extra costs and complexities of payments to and from foreign accounts. 
• Faster Payment Clearance: Payments between bank accounts in the same country are processed through a local payment system, reducing the delays typically associated with cross-border transaction procedures. 
• Reduced Transaction Costs: Local currency accounts eliminate the need for currency conversion and minimize exposure to exchange rate fluctuations.
• Boost Business Credibility: Local currency accounts provide a local banking identity, which may benefit business credibility with domestic suppliers and customers within a specific country.

• Limited Currency Flexibility: Local currency accounts typically only support the currency of the respective country or region, making them less versatile for businesses that deal in multiple currencies across different markets.
• Potential For Increased Costs: Funds in local accounts are not fluid across currencies, potentially leading to delays and additional costs when currency conversion is necessary.

Given these limitations, businesses operating internationally or dealing with multiple currencies might find local currency accounts restrictive. In this case, multi-currency accounts may offer a more flexible and efficient solution by allowing multiple-currency management under a single account number. 

If your business often handles transactions in multiple foreign currencies or is planning to expand into various regions, a multi-currency account offers the convenience of managing several currencies under a single account, streamlining your financial operations.

Let’s see how a local currency account compares to a multi-currency one.

In contrast to local currency accounts, which require a separate account for each currency, a multi-currency account allows the account holder to hold and manage funds in different currencies within a single account number. 

Although multi-currency accounts do not provide specific local account details, many banks and account providers now include features that support local payment methods, facilitating payments in the same currency and enhancing international transaction efficiency.

Whether you can benefit more from a local or multi-currency account depends on several factors, including the nature of your business and your business operations. Here are some questions to consider when choosing the type of account:

• Where are your customers and suppliers located? If they are primarily in one country, a local currency account might be more beneficial.
• How often do you handle transactions in foreign currencies? If you frequently transact in various currencies, a multi-currency account might provide more flexibility.
• What are the costs associated with each type of account? Consider the costs, such as monthly maintenance fees, currency conversion rates, and other fees related to international transactions.

Moreover, there are various types of bank accounts with features for different business needs. If your goal is of your goal is to earn interest on your deposits, a local savings account may be the best choice. However, for businesses primarily focused on the convenience of transferring money internationally, a multi-currency current account could be more suitable.