There’s a simple way to make international transactions easier for you and your clients:
Make payments in local currency.
Bob Murray is the Director of Foreign Exchange at Brookline Bank and he’s been involved in foreign exchange markets since the early 80’s. Throughout the years, he’s seen how foreign exchange can really touch all areas of a bank. From international payments to wire transfers, having a solid foundation in foreign exchange markets is critical for the success of a bank.
Bob has also noticed something else that has stayed the same in the several decades he’s been in this space: it’s still fundamentally a relationship market. Without a relationship formed between a foreign exchange salesperson and a customer there can be no hope for a productive and lasting business exchange between the two parties.
“The trust factor that needs to be built between the bank representative and their client is the most important thing to any foreign exchange business.” – Bob Murray
We sat down with Bob in this episode of Payments Innovation to talk about Brookline Bank, the foreign exchange market, international currency exchange best practices, and educating customers on this space.
Brookline Bank is the parent holding company for three New England area local banks: Bank Rhode Island, Brookline Bank, and First Ipswich Bank. As these local banks have grown they’ve had more of a focus on expanding their commercial and industrial lending portfolio. As the portfolio has grown, they’ve increased their product and service offerings accordingly and Foreign Exchange is part of these offerings.
Brookline Bank focuses on small to medium size portfolio clients. That size of customer doesn’t usually have the same exposure to all of the potential issues with international trade that larger enterprise companies might already be familiar with (and have a dedicated internal team to deal with). Currency exchanges are just usually not on the forefront of small to medium sized business’ minds. In a region like the UK it is second nature to many companies to exchange currency, but not this not always the case in the US; smaller entities need help with some of the details.
International Currency Exchange
Bob and his team like to build their reputation as a trusted advisors who can help companies navigate the complex waters of international currency exchange. Larger corporations have much more sophisticated needs (and are sometimes even larger than many banks themselves!). But as you look at companies who are smaller in size and scale, the sophistication drops away and the role of being an advisor as a bank increases exponentially.
It is more effective for companies to make international payments in local currency rather than US dollars. As currency conversion is becoming much more prominent in the US (like it already is in Europe), it’s important for companies to make the decisions surrounding international currency exchange.
Many times they are paying far more than they need to in exchange fees by making foreign payments in dollars and paying for exchanges on the other end of the transaction. They need knowledge and education to make more informed decisions. Often they are missing out on large competitive advantages simply due to lack of education.
“A decision not to hedge is still a decision.” – Bob Murray
From companies in the startup phase to larger companies making their first international payments, Brookline Bank helps many different types of companies. Their approach to education is to not preach or oversell the value they provide. They just try to lay out their research and provide examples of gaining competitive advantages.
For example, they have an independent study that shows nearly 95% of all US dollar payments overseas end up being converted at some point to local currency. All banks charge exchange fees, so many businesses are needlessly paying for these exchange rates at a higher price point than necessary.
Often a customer will change their invoice to include what they’re paying their bank in exchange fees. If US companies instead pay with local currency they have better control over their costs because they can control who is exchanging their currency. When a company has better control over their exchange rate fees and costs, they can deliver more competitive rates, cut out unnecessary middlemen, and give savings to customers.
“95% of all US dollar payments overseas end up being converted at some point.” – Bob Murray
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