Risk Management

Page 1 of 2

Driving the Digital Reinvention of Transactional FX Accessing effective, convenient and transparent foreign exchange services is key to achieving common treasury objectives such as managing foreign currency payments and collections efficiently and protecting the business against the impact of currency fluctuations.

Driving the Digital Reinvention of Transactional FX 

Driving the Digital Reinvention of Transactional FX

By Gregory Edwards, Global Head of Transactional FX, HSBC and Les Radvanyl, Director - Foreign Exchange, HSBC Canada


Whilst the banking industry continues to embrace digitalisation, corporate treasurers continue to face multiple challenges in supporting their expanding international operations. While each organisation will have different priorities, treasurers are typically seeking to simplify and improve efficiency in managing foreign currency operations, protect the business against the impact of currency fluctuations, achieve price transparency, and manage operational risks. Accessing effective, convenient and transparent foreign exchange services is key to achieving these objectives, including managing foreign currency payments and collections efficiently.
 

 

While these objectives are likely to be similar for all organisations operating across markets, from the largest multinationals through to emerging microbusinesses, there are clear differences in the resources and technology they have to address them. Solutions combining advanced, scalable market technology with specialist FX expertise can be a vital way to overcome these challenges. Furthermore, these solutions present entirely new opportunities, leveraging both new and existing technologies to create new business models and potentially new treasury models.


Drivers of digitalisation in banking and applications in FX

A recent McKinsey report [1] reveals that twice as many leading companies closely align their digital and corporate strategies than those that don’t, and winners tend to respond to trends in digitisation by changing their corporate strategies significantly. Digital investment can be an important differentiator, not only in the efficiency of an organisation’s internal processes, but also the way it engages with, and offers solutions to its customers. HSBC has placed digitalisation at the heart of its corporate strategy, transforming systems, processes, solutions and customer service models to offer unique client offerings and playing a leadership role in the digital banking agenda.

There are a variety of factors that together have acted as a catalyst for the bank to embark on this digital transformation, not only within the bank, but also to support the customer journey.

Firstly, customer expectation has evolved, particularly given the impact that digitalisation is having on the way that individuals and businesses consume products and services, communicate and collaborate.

Secondly, in an environment of increasing regulation and compliance requirements, combined with the critical need for efficiency and security, digitalisation enables the bank to fulfil these essential requirements in a cost-effective, robust way. 

Thirdly, technology has a major role to play in areas such as FX services, a key activity for HSBC, in order to increase speed and convenience of execution, reduce costs, and enhance transparency and reporting.

The first point is partly inspired by a generation of emerging technology companies, including fintechs, who are using new and alternative deployments of established technologies to challenge and push the boundaries of established business practices. While technology innovation and entrepreneurship associated with smaller fintech companies is just as apparent amongst large international banks, the delivery challenge is far greater. HSBC’s customers expect consistent processes and reporting, and a cohesive experience globally, rather than fragmented solutions that may offer excellent functionality but lack global applicability or integration capabilities. The task for HSBC has therefore been to harness the best in technology design, functionality and integration, whilst creating a cohesive customer experience globally.


Digital innovation in context: FX made easier

While innovative technology is often exciting and challenging, it can offer genuine value where it solves a problem or creates opportunities that did not exist previously. FX is an area that offers potential opportunities for automation and transparency, which over the long term could help many corporations achieve transparency and better understanding of their operations. While every organisation’s – and indeed every customer’s – needs, preferences and priorities will differ, HSBC has worked extensively with customers to understand the key characteristics of FX technology that they value the most, and what has the greatest positive impact on their experience of working with the bank. This ongoing analysis reveals that customers are seeking:

  • Simplicity and speed. Customers are looking for technology that is easy to use, to simplify and accelerate processes.
  • Reliability and standardisation. Solutions need to be robust and consistent across countries, regions, organisational structures and technology infrastructures so that different treasury centres, business units and mobile users can rely on consistent processes and reporting in each location.
  • Real-time 24/7 FX rates. With the extent of change that is taking place in international commerce and the evolution of the payments landscape, it is no longer sufficient for treasurers to receive daily FX rates for cross-border payments and FX conversions. Instead, they are looking for dynamic rates to allow more precise funding and hedging.
  • Tailored cost structures. Given the diversity of corporate FX requirements, customers expect this to be mirrored in cost structures that are appropriate to the currency, amount and channel, and therefore reflect their business needs more precisely.
  • Transparency of FX rates. Visibility over FX rates is a key objective for corporate treasurers both for accounting, audit and best-value purposes: in fact, in many cases, visibility and auditability can be more important than the rate itself. 

 

Note
1  The Case for Digital Reinvention’, Jacques Bughin, Laura LaBerge, Anette Mellbye, McKinsey. McKinsey Quarterly. February 2017.

 

Next Page   2 

Save PDFs of your favorite articles, authors and companies. Bookmark this article, or add to a list of your favorites within mytmi.

Discover the benefits of myTMI

Register Today for FREE!

 Download this article for free

Latest Articles from HSBC

Older Articles from HSBC