There’s a reason the fastest man in the world doesn’t run hurdles. It represents a factor that would slow down Usain Bolt, holder of the most career Olympic track and field gold medals. Arguably, he could trump anyone in a hurdle race. However, he’s been able to sustain an unworldly record of speed and performance excellence, including a perfect nine-for-nine in Olympic final wins, by taking a risk-based approach to his running and eliminating any factor that would hinder acceleration.
Fresh in the wake of the Rio 2016 Olympic Games, I couldn’t help but see the parallels to the challenges and opportunities in the financial services industry. Companies that are able to find success in cities around the world, and sustain strong and consistent growth also take a risk-based approach to operations.
Coming from a background of business experience in the FX industry, there are numerous proverbial hurdles that could hinder sustainable and integrational growth for a business, such as FX rates, regulations and red tape. In order to set the bar high, and continually set new heights as Bolt has done, businesses should not have to worry about the mechanics of what is going on behind the scenes, like real-time FX transactions for instance. Whether the objective is to expand the company’s global footprint, or reduce costs and improve payment efficiencies, businesses need efficient and savvy technology to live in the background so they focused on their finish line of unique goals.
FX rates generally live behind the scenes. They are not part of the slick front end, nor the exciting user interface. However, when moving high volumes of money around the world, they are of crucial importance.
Lack of transparency around exchange rates is one of the major drawbacks for small and growing businesses when looking to manage international transactions through the banks. Without a trusted FX partner, businesses waste time scouring the market for the best rate – representing a rather large hurdle when it comes to efficient and sustainable growth.
If a business tends to make just one transaction, this transparency might not be a big deal – it’s just some basis points either way. However, if a business is making (or plans to make) 100s or 1,000s of transactions, this starts to become important, as even a small difference can have a seismic impact on the amount of money that will be put in the recipient’s bank account following a money transfer.
There are many things at play here. First, It’s a question of risk. If a provider is not giving real-time, wholesale rates, someone has to pay for the risk of fluctuations. Generally, this means an increased spread, so not only do you pay more than you otherwise would, you won’t see the benefit if the market does go in your favor. This is a challenge for the business in question, as well as its customers. Without a real-time, wholesale rate at the time of trading, how can it set the price of currency transfers, and guarantee transparency for its own clients? Second, and not less important, is that some FX providers add a fluctuating margin on top of the interbank rate based on market volatility at the time of transaction(s).
Uncertainty in the US during an important election year, alongside a polarizing EU referendum, has been reflected in increased FX market volatility, emphasizing the need for real-time FX rate provision. Businesses must be ready for dramatic rises and dips, and make currency hedging a core part of their business strategy if they are to thrive in today’s unpredictable environment.
FinTech firms have a key role to play in bringing this visibility to market. And should alleviate their clients’ worries about behind-the-scenes payments technology that would hinder their optimum performance.
At Currencycloud, we will not compromise this end-to-end transparency. We are committed to allowing our clients to view real-time multi-currency balances and transaction history. We may never see payment transactions flow as fast as Bolt can run the 200-meter dash, but we remain equally committed to improve the way and rate money flows around the world. This control and flexibility sits at the core of our Payment Engine, giving our clients the option to customize and manage their payment flows according to individual business needs.
To quote Usain Bolt, “Worrying gets you nowhere. If you turn up worrying about how you’re going to perform, you’ve already lost.”
In a small way, we are helping eliminate worries and removing the (global payment-related) hurdles that may prevent our clients from achieving their full potential. The expansion of the digital economy means we must re-imagine the way money flows around the world, with an increased focus on speed and transparency, in order to be the gold standard for the financial industry. The provision of real-time FX rates has to be part of this, rather than serve as a hurdle to any business goal or objective.
Nabeel Siddiqui is Vice President of North America for Currencycloud. He has more than 18 years of international payments, FX trading and FX broker/dealer experience. Prior to joining Currencycloud, he was a founding member at AscendantFX Capital Inc., an FX brokerage firm specializing in B2B international FX payments and receivables. Mr. Siddiqui also co-founded two financial services companies and has led the growth in FX practices within established institutions including RBC Capital Markets, Custom House Global FX, Travelex and Thomas Cook.