Driving Cross-Border Payments Into The Future

What can foreign exchange service providers learn from the Uber model?

Increasingly, firms selling abroad are embracing the belief that there is a business advantage to making products available for purchase in foreign customers’ home currencies. Taking the exchange risk and conversion off customers can make it an easier decision to hit the buy button, netting extra sales volume for merchants in the process.

Removing exchange risk often positions a business to negotiate more favorable commercial terms, according to Mark Frey, COO of Cambridge Global Payments, a cross-border payment and currency risk management strategy provider.

Despite the benefits of accepting a mix of currencies, this move can be daunting. Businesses must consider how to limit their own risk, secure stable margins and ensure the extra sales income is not eaten up in costs. That’s where foreign exchange (FX) payment providers step in to help.

FX service providers like Cambridge Global Payments assist customers in developing strategies to manage risk and facilitate cross-currency payments. For a B2B provider to really stand out, though, Frey says “fast and seamless” is increasingly the name of the game, much like Uber presents a seamless way for rideshare passengers to summon and pay for transportation.

Smoother payments, happier businesses

According to Frey, the foreign exchange market can learn a lot from Uber’s business model.

“Part of [the] attraction of Uber to so many individual consumers is the fact that the payment is rolled up in the service itself — it becomes ancillary to the overall process,” he said. “That same level of frictionless experience that we’ve come to expect and understand as consumers [is], to a certain extent, … being demanded [more and more] in a B2B sales environment, as well.”

Just as Uber makes payment integrated into its service, Frey said, FX providers like Cambridge Global Payments can help businesses with services that conduct smoothly without drawing attention to themselves. The company aims to make cross-currency trade and movement of funds occur at the same time a customer makes a transaction.

To do this, Cambridge Global Payments integrates its foreign exchange price clearing engine with a global seller client’s front-end web portal. When a customer makes a transaction on the business’s website, an FX trade is locked in at the same time. Data flows behind the scenes to the FX provider without requiring a separate log-in to access the trade.

Faster methods

How else to make a cross-currency exchange feel smooth and seamless? Real-time transaction speed, or as close to it as possible.

In many cases, product won’t flow if the cash doesn’t follow suit. This means a manufacturer’s business will hit a snag if the goods sit on a dock, waiting on payment arrival before they can be released for loading onto a cargo ship, Frey noted. Regardless of the business industry, payment recipients expect their transaction partners to follow through on their commitments.

“Ultimately, it’s about ensuring money arrives where it needs to get to in a timely fashion,” he explained. “In a big picture sense, the world is moving more toward real-time transaction process, rather than doing things in batch file with a wait in between.”

Frey predicted payments on platforms will increasingly be impacted at the point of making transactions as opposed to the day after. Making payments transfer quickly can mean looking beyond traditional methods.

Conventionally, a business seeking to accept an array of currencies might resort to establishing a banking relationship in each foreign market — something that can be costly and time-consuming, he said. The business might send or receive payments via SWIFT-conducted wire transfer, but some may find turning to an FX-centric provider eases the way.

Cambridge Global Payments takes the approach of handling Nostro accounts on behalf of clients, taking that work off clients’ shoulders. It also utilizes in-country payment rails, including in-country transfers and local equivalents of ACH, for faster payment without the sort of fees incurred by international wiring.

“It’s all about building that network of alternative payment methodologies and rails that we can leverage, and then looking at other technologies outside of those in-country clearing methodologies as well,” Frey said. “While SWIFT will always be an important part of this interconnectedness of financial institutions, it won’t be the only means we can leverage across borders.”

Rapid response

For companies seeking to make payments across multiple currencies, a favorable uptick in the exchange market is something to be taken advantage of before it vanishes. Automated services can come into play via automated market orders, and Cambridge Global Payments’ clients can set up a currency amount for automatic exchange if the rate improves to a specified level.

Uber may have another lesson to teach the FX market: portable service. Frey explained his company offers a mobile app allowing executives to access core FX features like making market orders, booking an FX trade or approving a payment.

As cross-border service providers continue to identify and explore new ways to securely conduct quick and seamless transactions, the industry will keep driving forward.

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About The Report

The PYMNTS X-Border Receivables Report, powered by Flywire, is your go-to resource for staying up-to-date on a bimonthly basis on the notable changes and shifts in the cross-border receivables market.