Cash & Liquidity Management

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An Integrated Approach to International Payments Many treasurers are seeking integrated solutions that extend the payment and collection efficiencies they achieve for domestic transactions to cross-border and cross-currency transactions while managing FX risk.

An Integrated Approach to International Payments

by Adrian Brown, Head of Commercialisation - FX+, BNP Paribas Global Markets and Wim Grosemans, Head of Product Management, International Payments, BNP Paribas Cash Management

Adrian Brown and Wim Grosemans

Digital innovations over the past five years have changed dramatically not only the way we work, communicate and socialise, but also our expectations of how data can be used to transform processes, intelligence and services. If we buy a product or service online, for example, we can place an order, make and authorise a payment, receive notification of the order status, and track delivery from dispatch to arrival. Each of these points reflects a different step in the physical and financial supply chain, which in a large company would be managed by a distinct business function and set of systems. From a customer perspective, however, these steps are all part of one transaction.

Providing information at each stage in the transaction process has become essential to enhance the customer experience and build confidence and trust. Increasingly, treasury and finance professionals are expecting a comparable degree of integration, transparency and transformation in their banking transactions, whether they are buying or selling domestically or cross-border.

The next step in payment efficiency

The quest for payment and collection efficiency is nothing new. Many companies have already achieved a high degree of visibility, control and efficiency in their payments and collection processes. Not only is the use of electronic payment instruments and processes now prevalent, but treasurers and finance managers are successfully introducing automatic reconciliation and account posting, centralised flows through payments/collection factories, and efficient techniques such as payments-on-behalf-of (POBO) and collections-on-behalf-of (COBO). These solutions are allowing companies of all sizes and located in all jurisdictions to streamline and automate their payments and collections regionally or globally, and reduce the number of accounts that they operate.

For many companies operating internationally, however, the final missing element of the transaction process is the foreign exchange (FX) component. Depending on the industry and business model, most companies will need to pay and/or receive cash in multiple currencies. As a result, they need to maintain accounts in different currencies, and are subject to FX risk. Treasurers can choose to manage FX risk separately in the FX market, but this option is typically only open to treasuries with the necessary systems and resources in place, and/or for currencies in which exposures are sizeable. In some cases, currency specific regulations will make it more difficult to hold centralised current accounts. For smaller currency exposures, and for smaller treasury functions, it is not cost- or risk-effective to manage these exposures separately. As a result, treasurers are seeking integrated solutions that extend the payment and collection efficiencies they achieve for domestic transactions to cross-border and cross-currency transactions while managing FX risk.

Combining market leading capabilities

For BNP Paribas, as a market leader in both wholesale FX and transaction banking, combining these two capabilities was an obvious step by integrating our Global Markets transactional FX solution, FX+, into our payment and cash management solutions. We can therefore support clients’ international cross-currency payment and collection requirements by converting foreign currency flows automatically. Our cross-currency payment solution is already available to clients in 12 countries in Asia, 6 commercial centres in the Middle East and 14 countries in Europe, covering 132 currencies, with the rest of Europe and North America to follow during the course of the next two years.

By integrating the FX risk management into an outgoing or incoming payment, cross-currency payments reduce the administrative burden and cost of maintaining multiple foreign currency accounts and reduce the FX risks to which the company would otherwise be subject. Clients benefit from transparent, auditable, automated end-to-end transaction processing, from execution through to FX conversion and reconciliation.

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