B2B Payments

Post-Election And Beyond, Cross-Border B2B Volatility

Cross-border payments, including in B2B, can be made daunting by FX swings, and treasurers and other payments professionals need robust and automated data streams to monitor risk and hedging strategies, says OANDA Managing Director Natasha Lala.

As businesses of all sizes and verticals extend their operations and supply chains beyond their home borders and into other countries, they also remain increasingly exposed to foreign currency swings.

The company that looks to bring international suppliers on board and then brings B2B payments (or, in other cases, sales) across different countries (or, in some cases, many countries) opens margins up to fluctuations. Currency swings can be wide enough and frequent enough so that waiting to reconcile transactions, anticipate risk and hedge against that risk is not a weekly or daily event — it’s best done in real time.

In an interview with PYMNTS, Natasha Lala, managing director at OANDA Solutions for Business, said stepping back and viewing the FX and cross-border landscape reveals a broader trend of volatility “that is not just about the last month.” She noted that, within the past 12–18 months, volatility has been on the rise, with, of course, recent events adding to those currency swings, such as Brexit and the surprise election of Donald Trump to the presidency.

Amid volatility, especially for mid-market firms, said Lala, the rapid change in FX rates can have an impact on payments and cash flow.

Against this backdrop, said the executive, the financial professional dealing with far-flung payments needs to have access to real-time FX data and be able to transcend the manual processes that are currently the hallmark of many firms. “There’s the need to automate the FX rate,” said Lala, especially as bid/ask spreads can, and do, widen amid volatility.

For firms that examine their in-place systems for dealing with cross-border payments, the questions that treasurers and other professionals must ask, said Lala, include “do you have the data you need that is also automated?” — which ensures the best pricing data is given over to decision makers and usually across several sources. And for firms in the middle market that want to manage their supply chains, said Lala, they simply “are not big enough to go to the banks and demand good services” in managing currency exposure.

And, she added, there are pain points that exist for these firms as they deal with intermediaries to complete international payments (and, of course, they must also pay fees for those services). Verticals that are beneficiaries of such real-time visibility, said Lala, include travel firms (as they are usually international in scope) and eCommerce companies.

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The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.

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