Although, for most companies, cross-border/cross-currency payments make up less than 5% of all payments, they can represent a major proportion of payment costs when the FX conversion costs (which make up the bulk of the income for the banks / service providers), the transaction charges and float costs are included.
Bank FX and Payment Platforms
For many years cash management banks have provided FX and payment services through a combination of cash management, FX and payment departments. As a consequence bank cross-currency FX payment processing and offerings have been rather messy and disjointed. This is changing, as banks develop more integrated FX payment services.
There are two types of platform - a high volume medium-low value disbursement FX payment platform from Citi and a general FX and payment platform from Deutsche Bank, both of which do not require the client to have a local currency account. Although clients often retain currency accounts in major countries, only getting rid of the accounts in countries where they have little trade.
The main features and differences between these platforms include:
- base currency(ies) of the platform
- the number of payment currencies and countries covered
- FX rates offered, e.g. live market rates for each payment, daily fixed rates
- trade types, e.g. spot, same day, next day, forwards
- the local options by which the beneficiary can be paid, e.g. same-day clearing, ACH, cheques, cash, payment cards for paying the beneficiary
- methods of accessing the service, e.g. electronic banking, host-to-host connections, SWIFT
- single payment and/or batch functionality availability
- operational reliability of the system, e.g. Is it fully STP
- how the FX trades and payments are reported
- ability to control/stop local deductions when need gross value delivered
- charging structure and level.
The key requirement in the FX and payment platforms is flexibility and choice as to how payment and account structures are handled.
Other Platforms and Services
As well as bank services, there are a range of third party international payment services from third parties. The services provided range from online payment systems which enable clients to initiate payments world-wide to systems that have a global network of accounts to support direct-to-account payments in more than 60 countries. Most of these services also do not require client's to hold local currency accounts.