Political instability is signaling a sea change the world over and forcing companies to reevaluate their positions in the global market. Part of that examination should involve taking a look at FX hedging strategy, says Money Mover, a cross-border B2B payments company.
Earlier this year the company warned companies to mitigate against FX volatility resulting from Brexit, urging firms — especially smaller ones — to strategize their global payments plays. The warning followed research from the company, released in early 2016, that estimated SMEs in the U.K. are spending nearly $5.8 billion in hidden fees when they conduct global transactions with their banks.
Further, Money Mover found that the nation's Big Four — Barclays, HSBC, Lloyds and RBS — don't offer SMEs a "straightforward way of deciding which one is most expensive," the firm said in its report.
Market volatility has heightened demand for affordable FX and cross-border payments solutions, but small and medium-sized businesses are still struggling to realize the benefits of a more rigorous focus on their FX strategies. Data from East & Partners recently found small businesses continue to lag in their adoption of FX mitigation tactics. Canadian small businesses beat out their global competition, having the highest portion that use FX options, but even then, researchers found that just 29 percent of Canadian small businesses deploy the tool.
Money Mover's strategy for growth could signal a new way for small businesses to become more acquainted with FX and global payment tactics.
The company recently raised nearly $650,000, which CEO Hamish Anderson recently told PYMNTS came from Andy Homer and Stockford Limited.
In announcing the new investment this week, Homer said Money Mover now has a major opportunity to strike more partnerships.
"There is a big opportunity for Money Mover to extend their services to the clients of the professional services sector," he said. "Accountants and consultants are trusted advisers to the businesses they serve, and it is in their best interest to continually innovate and broaden their offerings to clients."
While SMEs are still struggling to adopt FX and global payments tools, that adoption may rise is they can access these kinds of solutions, like those offered by Money Mover, from existing financial service providers.
"It's a win-win for both involved," Anderson said of the ability to team with other financial service providers, adding that Money Mover partners can provide these global payment services their SME clients need while keeping those SMEs within their platforms.
The executive stressed that traditional banks are still falling short on providing small companies with these services.
"Traditional banks don't offer clients of this size access to the institutional FX markets or provide transparency of payments," he said, pointing to features like transaction audits, instant transfers and payroll capabilities that small businesses are calling for but aren't getting from their banks.
The world's geopolitical climate means calls for these solutions are growing louder, too, he said.
"One thing we do know is that the current political climate is extremely uncertain," Anderson explained. "For some, that will pose an opportunity, depending on how their business model relates to the price of Sterling. However, for others, this uncertainty results in further financial pressure as companies do not have certainty over their upcoming international costs."
Interestingly, while Anderson said it's a problem that traditional banks don't offer the sophisticated FX and global payments solutions to SMEs that they do for larger enterprise clients, banks' help in this area only goes so far.
"Even the banks, with their analysts, models and access to the institutional marketplace, really struggle to profit in currency speculation," the CEO explained, adding that Money Mover doesn't tell SMEs when to buy currencies and instead focuses on making sure that, when a small business decides to do so, it can do so easily and affordably. It seems as though more SMEs are getting educated on how to execute their FX strategies, too.
"We've certainly seen a marked increase in our U.K. customers seeking to guard against further weakness in Sterling over the period of the U.K. general election, for example," Anderson said.
The CEO told PYMNTS that the next year for Money Mover will see continuing focus on its partner program to integrate with other financial services companies. The company also plans on launching Money Mover Software, which will allow FIs to license parts of the firm's technology to integrate within their own platforms.
Geopolitical uncertainty may be helping to increase awareness of SMEs of the importance of FX strategies, but East & Partners data suggests the market has a long way to go before it gains major traction with the small business crowd. According to the report, just 20 percent of U.K. SMEs use FX options to protect against FX volatility, for instance. But partnerships between Money Mover and other FX solutions providers and SME financial service providers could give a much-needed boost to adoption rates as geopolitical pressures continue to mount.