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Bridging the FX Gap: How Fintechs Are Equipping Banks To Support Global SMEs

When it comes to supporting larger Small and Medium-sized Enterprises (SMEs) scaling internationally, the established banking sector has been falling behind for some time. Despite the size and reach of traditional banking institutions, they struggle to support important FX aspects like hedging, local accounts abroad and exotic currency payments. Caught in the 'squeezed middle,' SMEs are left grappling with inadequate services. This paradigm not only hinders the global growth of SMEs but also highlights a missed opportunity for banks themselves. 

For traditional banks, the challenges are threefold: a general lack of focus on the SME market, complex data issues due to siloed internal databases, and the burdens of legacy in-house systems. These antiquated systems are costly to maintain and create roadblocks that make it hard for banks to respond swiftly to evolving business needs. In terms of FX – a crucial element for scaling SMEs – there is also a gap due to inflexibility and a 'one-size-fits-all' approach. 

Consequently, Fintechs are not merely 'filling in the gaps' - they are redefining the industry norms by demonstrating a greater focus on the client and adaptability than traditional banks and, in an outcome not seen by many, actually equipping banks to support global SMEs. For traditional banks, extensive regulatory red tape remains a major roadblock, restricting access to crucial services like underwriting or invoice financing. This holds up SME owners when they need to access capital or credit. 

Insufficient Forex risk advice adds to the challenge, and one HSBC survey showed 70% of CFOs reported reduced earnings due to avoidable, unhedged Forex risk. This points to a lack of tailored risk advice and a knowledge deficit in this area. Another issue is the current one-size-fits-all approach to forex risk management, which is proving unworkable for the modern, global SME. While the finance sector has embraced digitalisation, especially in the wake of the pandemic, FX risk management provision has notably lagged behind.

Fintechs have stepped in to remedy this situation. These agile, tech-focused companies have demonstrated a keen ability to offer bespoke services that align with the unique needs of larger SMEs. Looking at the banks' struggles with key FX aspects, such as hedging, further illuminates this point. The rapid growth in hedging volumes, fuelled by the volatility in global foreign exchange rates, means that while some larger corporate customers are being served adequately by banks, the smaller counterparts are being left behind.

However, against the challenges of this landscape come new opportunities for innovative players to serve global SMEs in a more client-centric way.  The rewards are rich for fintechs that really take the time to work with clients and understand what they need - and to help them mitigate risks linked to volatility in price changes to help them grow and prosper internationally. And with so much innovation in payment technology at the moment - there’s no excuse for any FX company to not be able to ensure the safe and efficient delivery of all international payments, comprehensive reporting and a streamlined payment function.

Ultimately, as larger SMEs continue to grow and navigate the complexities of international trade, they must look beyond traditional banks. Fintechs, defined by agility, bespoke solutions, and an innovative approach, are uniquely positioned to transform the FX landscape. This paradigm shift is not only beneficial for large SMEs but essential for their global success.




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Oliver Carson

Oliver Carson

Founder and CEO

Universal Partners

Member since

16 May



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