B2B Payments

The Intersection Of FX Management And Open Banking


Corporate cash inflows and outflows present ample opportunity for friction and disruption — and, as a result, ample opportunity for innovation. As evolutionary forces in the financial services space, like faster payments and Open Banking, take a closer look at how to disrupt the business finance world, innovators are beginning to examine the intercompany financial management challenges stemming from multinational corporations that manage dozens, sometimes hundreds of bank accounts, multiple foreign currencies, and a complex system of cash flows within and between business entities.

In a recent survey by Deloitte, half of companies said they lacked a defined ownership of intercompany processes, yielding a lack of visibility and management into key processes and activities. Most said they manually manage intercompany processes like reconciliation, while ad-hoc functions are also common.

This lack of insight into intercompany accounts can result in misstated financials, fraud and, overall, a lack of understanding into cash positions and allocations.

HSBC announced Monday (July 8) the launch of its Next Generation Virtual Accounts, a solution that aims to provide corporate treasurers with greater control over how they group corporate accounts and enabling them to consolidate those accounts based on function. The tool lets treasurers keep a single account for each currency, for example, or to group accounts based on product line or legal entity.

In another solution aimed at bank account consolidation, Neo announced today (July 9) that it is expanding its foreign exchange services to include the launch of a multi-currency account after receiving clearance by the Bank of Spain. That approval enables Neo to create a payment institution to store, receive and send payments and invoices in multiple currencies for corporate users while operating its own core banking system. According to analysts, multicurrency accounts negate the need for corporates to hold bank accounts in the jurisdictions in which they do business, or to conduct potentially expensive currency conversions when doing business across borders.

Open Banking Opportunity

As FinTech and financial services providers explore how to consolidate banking for large, multinational corporates, open banking initiatives like the Second Payment Services Directive (PSD2) are becoming a larger opportunity to support treasurers’ streamlined financial management needs.

While the multi-currency account is not necessarily a direct result of PSD2, Neo CEO and Co-Founder Laurent Descout told PYMNTS that the EU regulation enables connectivity between Neo accounts with other accounts in-use by corporate clients.

Application program interface (API) integrations, he said, allow businesses to be “more and more knowledgeable about [their] financial needs” by integrating directly with their other account, expanding visibility without forcing companies to toggle between multiple platforms and portals.

“What PSD2 has also improved is the client security linked to the account,” Descout added, noting that the regulation promotes and requires the use of security features like multi-factor authentication, log trails and roles and permissions, allowing businesses to view and manage which employees conducted which transactions.

The FX Opportunity

Foreign exchange management comes with a host of friction points for corporate treasurers, with many of those points considered low-hanging fruit for open banking and data integration.

Descout said seamless access to data and information was a key problem Neo aimed to address with the solution by providing finance managers and treasures with insight into incoming and outgoing payments — as well as all of the data fields attached to that transaction.

Neo’s focus on data also reduces the need for organizations to turn to auditors to dig out information traditionally hidden in silos, or to seamlessly connect that account information into existing back-office systems like accounting platforms.

That data connectivity also promotes a less painful customer on-boarding and product deployment process.

PSD2 and Open Banking regulations have not necessarily had a massive impact on the corporate banking sphere so far, but as opportunities to address friction are explored further, intercompany accounting and financial management become bigger targets for innovators.

That opportunity becomes even larger when foreign exchange friction is considered as global organizations demand new ways to digitize and consolidate their multiple bank accounts and currency management strategies. Corporate treasures often struggling to gain a single source of truth into company cash, and FX friction can further stifle that visibility — especially when organizations keep fragmented bank accounts in different jurisdictions in different currencies. API integrations, however, enable the unlocking of data for a holistic view of finances, regardless of where (and in which currency) those funds are held.


New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.