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Automating Transactional FX: Unlocking Efficiencies and Growth Opportunities Treasurers are starting to explore how automating their transactional foreign exchange (FX) workflows could bring significant benefits in a post-pandemic environment. What digital tools can assist?

Automating Transactional FX: Unlocking Efficiencies and Growth Opportunities

Automating Transactional FX: Unlocking Efficiencies and Growth Opportunities

By Eleanor Hill, Editor

Prior to the coronavirus crisis, few corporates had thoroughly reviewed the way they processed their foreign currency payments. But with remote working and rapid digitisation, treasurers are starting to explore the benefits of automating their transactional foreign exchange (FX) workflows. Sat Khuntia, Head of FX Sales, Barclays Corporate, and Daniela Eder, Head of Payments & Cash Management Europe, Barclays, examine the ways in which the FX payments ecosystem is evolving and outline a range of digital tools that could assist treasurers in the post-Covid-19 world.


Sat Khuntia

Sat Khuntia
Head of FX Sales, Barclays Corporate, Barclays

There’s an old adage that says, “don’t fix something if it isn’t broken”. And many corporates had taken this attitude towards their transactional FX workflows, until the pandemic hit. Before the crisis, transactions were agreed with counterparties, spot FX deals were made, and cross-border payments were initiated. Transactional FX was simply part of business as usual – and, often, little thought was given to the potential for operational efficiencies and strategic gains by improving these workflows.

The turning point came when treasury practitioners across the globe began working from home and currency volatility skyrocketed. As Khuntia explains: “When the world went into lockdown, treasury staff were faced with the reality of making FX-related payments, dealing with foreign currency receipts, and managing the company’s working capital in multiple currencies, via remote channels. Initially, many struggled to access the necessary systems from home and the amount of manual work involved in transactional FX workflows was highlighted.”

Treasury leaders soon began to question the validity of such a manual approach in a world that was shifting rapidly towards digital and automated solutions. “The inherent risks involved in manual FX processes also became apparent – and the crisis has provided a huge incentive for treasurers to take greater control of risks, maximise operational efficiencies and unlock growth opportunities,” he continues.

Increased volatility in the FX market has also added to the interest in automated solutions, says Khuntia. “At the start of 2020, the economic environment was relatively benign. Volatility in the euro even reached a record low in mid-January [1]. Soon, though, markets caught wind of the emerging coronavirus crisis and volatility began to spike. By mid-March, the US dollar was in enormous demand as investors looked for a safe haven and a number of corporate treasurers were taken by surprise. FX volatility quickly rose up their list of concerns.”

This is borne out by the results of a new research report published by TMI, in partnership with Barclays, which surveyed 300+ treasury professionals and CFOs on current European treasury trends. According to the report, entitled New Europe: Is Your Treasury Fit for the Challenge?, 42% of respondents see FX volatility as their number one macroeconomic concern for the year ahead (see fig. 1).


Fig 1: What is your top macroeconomic concern for 2020?

Fig 1: What is your top macroeconomic concern for 2020?

Source: TMI and Barclays research report: ‘New Europe: Is Your Treasury Fit for the Challenge?’

Real-time transparency

With the full economic impact of global lockdown becoming apparent, cash flow uncertainty also became a significant concern for treasurers. Goods and services could not be consumed at the same volumes, or in the same way, as before. Khuntia observes: “Not only did this put greater pressure on treasurers to have real-time visibility and transparency over their cash management and FX risk management, it also saw a shift in business models towards digital channels, which directly impacted treasury.”

Dany Eder

Daniela Eder
Head of Payments & Cash Management Europe, Barclays

Eder agrees, adding that: “E-commerce has had a significant boost [2] from the pandemic and many companies have expanded into new markets via digital channels. This presents treasury functions with fresh FX challenges – from paying new suppliers in local currencies, to selling goods and making refunds in foreign currencies. Treasurers are therefore having to deal with increased risks from currency conversions and fluctuations, as well as a lack of pricing transparency, varying transaction costs, and operational risks.”

On the upside, this focus on transactional FX is a great incentive to embrace technology which can  help to transform FX payments into a strategic tool for boosting sales, building stronger buyer/supplier relationships, and improving both cash and risk management. “There is a whole ecosystem of solutions available in the wider market to support transactional FX, ranging from instant payments and SWIFT gpi (see box 1) to automated FX risk management tools from banks and vendors. Fintechs also have a role to play, as do technologies such as application programming interfaces (APIs),” says Eder.

Bringing this to life, Khuntia shares some examples of best practice from clients he has worked with: “We have a number of clients who have already embraced automated FX solutions via our online banking channels. One functionality that has proved popular, especially since the crisis began, is the ability to upload a payment file onto our cash-management channel and have the pre-agreed FX rate automatically applied to each payment in that file.”

Eder adds: “This means that there are no hidden fees and there is no manual work required – which vastly reduces error rates. Rather than treasury personnel being tied up filling in FX rates for hundreds of individual transactions, a single payment file can be uploaded at the touch of a button and the legwork is done for them – enabling them to be redeployed to more strategic tasks. What’s more, all of the information about the payment can be viewed online in real time, providing total transparency.”

Automated FX solutions also exist for those corporates needing to make refunds in local currency to customers. Khuntia continues: “Sectors such as travel have been inundated with refund requests as a result of global lockdown. With buyers and sellers typically in different countries, making refunds can result in FX exposures where rates have changed since the time of purchase. Via our automated FX channels, we can provide cancellation/refund cover, which means that if a cancellation or a refund happens on a transaction after several weeks, we remove the FX risk by automatically giving them the original rate used. All of this functionality happens behind the scenes via API and has been a huge benefit for clients during the crisis.”


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