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Forex for SMEs — Integrated Solutions are the Answer

Did you know that the foreign exchange market is the largest market in the world? According to the 2019 Triennial Central Bank Survey of FX and OTC derivatives markets, it exceeds a daily volume of $6.6 trillion, which is higher even than the stock exchange. But the truth is that most traditional foreign exchange providers are still focused around larger scale clients. As a result, the vast majority of small and medium businesses struggle to find ways of remitting money from abroad, and they have trouble accepting payments from international clients. Luckily, the situation for these businesses is changing with new foreign trade products cropping up on the market. What are these and what benefits can they bring? 

Why FX services from banks don’t tend to support SMEs

There are several reasons why traditional finance institutions tend to support small and medium businesses with foreign payments. 


The top reason is perhaps the regulatory red tape that prevents such companies from accessing services such as underwriting or invoice financing. In practice, this means that the owners of SMEs face a major challenge in raising working capital and keeping their business operational. 

Limited Forex risk advice

In a survey of 200 CFOs and nearly 300 treasurers conducted by HSBC and FT Remark, 70% of CFOs said that their company suffered reduced earnings in the prior two years due to avoidable, unhedged Forex risk. This points towards the fact that many SME execs have insufficient knowledge of such risk. This problem is so widespread, that the SMEs which derive much of their revenues from overseas might struggle with remaining profitable. 

Lack of global payments solutions tailored to SMEs

Although the pandemic has significantly sped up the pace of digitalization in the banking sector, there still tends to be a ‘one size fits all’ approach when it comes to forex. In a nutshell, traditional banks tend not to have a global payments provision for SME clients. What’s the result? 

  • SMEs end up using the same solutions as large corporates and end up paying high international payments transaction fees. 

  • There is often a lack of transparency regarding these fees.

  • For many entrepreneurs who occasionally pay in foreign currencies, it might even be challenging to fill out the payment form, since it is different for different currencies and in many cases written using financial jargon. 

  • Once the payment is made, its often hard to assess when it will reach the final recipient. It might even take as long as 2 weeks. In a fast business environment this is a very long time.

Are SMEs paying the price for a lack of FX provision? 

According to Laurent Descout, CEO at NEO Capital Markets, the FinTech revolution has resulted in winners at both the top and bottom end of the market, namely consumers and large enterprises. The regular shopper can now use their phone or smartwatch to send a payment to a large retailer of their choice with a single touch. Both the purchaser and the enterprise are benefitting - they’re technologically set up for the transaction to go through smoothly. Everyone’s a winner, right? Well - almost. What about SMEs?

An example: An SME clothing retailer operating in seven countries

To illustrate the above point, let’s take the example of an SME clothing retailer operating in seven countries (and therefore executing transactions in seven different currencies). They are faced with long lead times and high commissions because they need to pay a bank to convert the majority of incoming and outgoing transactions. In addition, each currency is held in a separate account which means that it’s impossible to view cashflow in real time. 

This lack of visibility is a real issue which can result in unnecessary costs. It can also affect risk management, which requires real-time market information and reporting of incomings and outgoings. Some small and medium-sized enterprises try to solve this problem by installing complex add-on market terminals. Similarly, post-execution management involves the input of several suppliers and vendors, which can significantly slow down communication flows. This is only one side of the medal. If you add different timings for incoming and outgoing payments it makes it difficult to have access to the company's payments situation at any given moment in time.

There’s a real need for process improvement in this field and the introduction of efficiencies. Could the solution lie in Forex companies? 

The new wave of Forex services for SMEs

Over the past five or so years, Forex companies have been changing the game for SMEs. A forex company, or a forex broker is a financial services company that provides traders access to a platform for buying and selling foreign currencies.

They can help to educate SME executives on FX risks and can help to prepare them for how to budget FX costs into their quarterly and yearly cash flow forecasts. They might also set a ‘costed level’ on the currencies they are using to ensure there are no surprises.

Companies offering such services include global risk management and payments platform AFEX, and XCAP which offers SMEs considerable savings on transferring and receiving currency from abroad.

New BaaS platforms offering foreign currency services to SMEs

There has also been a new wave of Banking as a Service (BaaS) solutions, which form part of the embedded finance revolution and may be particularly suited to SMEs. 

OpenPayd - Through OpenPayd’s  API-driven technology, companies can embed financial services into their products. The platform also enables FX conversion across a wide range of currencies, with real-time trading and API-enabled spot pricing. SMEs can benefit from OpenPayd’s international regulatory coverage through its network of global licences.

Curve - An innovative payment provider. It’s a mobile app where you can put all your cards from banks all over the world, and you can easily move your money between the cards. The app is also connected to ApplePay or Google. We particularly liked the interoperability of the payments. 

Stripe and Airwallex - We thought that web-based payments infrastructure providers are the way forward when it comes to banking platforms for SMEs. But we also felt that customers, while they use these services, often want advice from a real person when they have a specific question or problem. That’s why there’s a future in connecting such services with establishments that have a brick and mortar physical store.

Kantox -  A company that provides you with the system that presents all your currency exposure, supporting you in your international payment decision making process and hedging your position. We are living in the reality of services connected to payments, but there are few solutions which help you manage exposure. Should you hedge the position? Should you close it? What is the risk that you’ve exposed yourself to? The system tries to support you in the decision-making process.

TreasurUp - This platform integrates web, mobile, ERP connection and people. TreasurUp is designed to interface through its API architecture with just about every bookkeeping or ERP platform in the world. 

What are SMEs looking for when it comes to FX? 

Based on 10Clouds’ market research, SME leaders were typically time-poor, often travelled for business purposes, weren't always convinced by new FinTech products and still tended to favor face to face interaction. When it came to a Forex solution, they would be looking for: 

  • Integrated services that offer them holistic payment solutions that cover all their needs.

  • A solution that uses the latest AI technology to simplify banking processes for users.

  • A platform with instant recognizability wherever you happen to be in the world. 

  • A tool that has inbuilt risk-management functionality and foreign currency fluctuation tracker.

  • An intelligent combination of human support into banking where needed. 

  • A tool that has a real-time overview of the market and a currency fluctuation monitor..”

Learning about foreign exchange risk management

One of the biggest questions is how to create an advisory tool for FX transactions, which would be a game-changer for customers. This would ideally define the risk profiles and propose the hedging scenarios for each customer, enabling them to manage their payments and investments more wisely. 

Adhering to differing regulations

There is also the problem of differing regulations in different regions, as well as electronic money regulations. So the tool needs to take into account the regulatory requirements for all the countries that the customer operates in. When having hedging solutions in mind, the big question is how to deal with MIFID regulations? This is especially relevant when thinking about scalable solutions for different markets, as the local market interpretations are different. 

The future of SME foreign exchange is filled with possibility

During our Banking of the Future workshops, we saw that the future of foreign exchange solutions for SMEs lies in integrated finance solutions, which are efficient, affordable and highly tailored to the end user. The goal of FinTech providers should be the creation of easy-to-use embedded platforms which connect with all the users’ existing banking providers, accounting systems, invoicing tools, CRMs and more. Such integration is very likely to improve the cash flow predictability. Ideally, the platforms should also feature an inbuilt risk tool and real-life support where needed, potentially through a partnership with brick and mortar businesses. The potential in this field is huge. It’s just about harnessing it in the right way.


Comments: (1)

Tony Crivelli
Tony Crivelli - Fluenccy - Melbourne 31 January, 2022, 03:09Be the first to give this comment the thumbs up 0 likes

So good to see some focus on SMEs. As we know, they are the backbone of employment for most economies and they are rapidly becoming the dominant player in real money FX. And they need the most help with FX. 

Karol Stepien

Karol Stepien

Head of FinTech and Banking


Member since

23 Nov 2021



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