A Dynamic Partnership: Bank-Fintech Collaboration Improves FX Risk Management

For the treasury community, one of the hallmarks of 2019 was the growing collaboration between fintechs and banks. Nowhere is this more evident than in the partnership that Kantox and BNP Paribas have forged, helping treasurers to improve their foreign exchange (FX) risk management processes by leveraging sophisticated technology, while strengthening their bank relationship. This unique collaboration is a deserving winner of TMI’s 2019 Award for Solution Innovation – FX Risk.

Managing FX risk has long been a headache for treasurers – with many citing excessive manual processes, lack of visibility over FX exposure and FX volatility as key challenges. To help treasurers solve these pain points, Kantox designed an innovative software solution, called Dynamic Hedging [1] which enables corporate treasurers to completely automate, hedge small or large transactions in bulk, and to streamline FX workflows.

Since its launch in 2016, Dynamic Hedging has achieved significant traction among SMEs and small mid-caps. The solution’s popularity only increased when Kantox expanded its functionality significantly in 2018, with the introduction of Dynamic Hedging Analytics – a live, data-rich dashboard. Nevertheless, as Philippe Gelis, CEO and Co-Founder, Kantox, explains: “Larger corporates were reluctant to use Kantox to execute FX trades, due to their preference to continue using their existing banking partner or partners.”

As such, Kantox began searching for a way to reach a wider audience of treasurers. And in 2019 Kantox and BNP Paribas announced a strategic partnership to jointly offer Dynamic Hedging to BNP Paribas’ clients across EMEA, complementing the product suite available on the bank’s digital banking platform, CENTRIC.

Xavier Gallant, Co-Head of Corporate Rates, FX and Local Markets Sales EMEA at BNP Paribas, notes: “When it comes to managing foreign currency risk, we are seeing a real need for our corporate clients to improve efficiencies in forecasting their future cash flows, formalising hedging practices and optimising execution through automation.

BNP Paribas’ partnership with Kantox offers corporate treasurers in EMEA the opportunity to access a fully automated hedging solution and ultimately improve their treasury processes.”

How it works

Through this unique partnership, corporate treasury teams benefit from access to the latest in FX risk automation software, while maintaining their existing banking relationship, leveraging their usual cash management technology, and benefitting from BNP Paribas’ liquidity. Using straight-through processing (STP), the corporate FX workflow is also automated, eliminating FX risk and the need for manual intervention.

In turn, this has the potential to bolster departmental efficiency and allows treasurers to focus on more value-added tasks. BNP Paribas clients using the solution also receive an enhanced service through their existing bank Relationship Manager and dedicated Kantox Channel, since the partners launched a ‘joint task force’ to ensure the smoothest possible outcome from their collaboration.

Says Gelis: “This ‘joint task force’ has enabled seamless co-operation and collaboration between both parties for the delivery of each business case – including solution customisation and implementation – according to the specific characteristics of each corporate. This approach has led to a quick uptake of the solution by clients, since there are no service gaps.”

An additional success factor in this partnership was the appointment of a dedicated solution champion inside BNP Paribas, as well as dedicated Head of Partnerships and Banking Relationships, inside Kantox. Furthermore, BNP Paribas Relationship Managers have been equipped with materials to help them talk to clients about technology and its role in building an efficient treasury function, thereby spreading the message around the true value of FX automation.

Award-winning collaboration

The TMI judges believe this partnership is an excellent working example of an innovative, integrated and solution-focused bank-fintech collaboration. The result is a complementary partnership that plays to the strengths of both parties while fostering loyalty and delivering value to corporates, while contributing to best practice in the treasury profession.

Gallant adds: “Partnerships with companies like Kantox enable us to make the most of our core strengths as a leading global bank, while tapping into the cutting-edge solutions from the fintech world. Through this partnership, it is our ambition to utilise the latest technology to bring value to our clients’ treasury operations in terms of achieving efficiency and productivity.

“After all, with economic and market forces placing increased pressure on clients’ margins, they are looking for more efficient ways to handle risk. The partnership with Kantox offers improved control to our European corporate clients, allowing more FX risk to be managed efficiently in-house, turning an inconvenience into a competitive advantage. And improved hedging strategies and procedures made possible by automation can translate into higher sales or higher margins for our clients. As such, this is a truly innovative digital solution that directly meets our clients’ needs.”

Gelis agrees, adding: “BNP Paribas immediately saw the benefits our Dynamic Hedging solution offered. Since launching our partnership, they have worked closely with us to build a scalable and efficient joint offering that helps their clients completely automate certain FX workflows and efficiently hedge currency risk.

“This TMI Award is a significant recognition of the value-generating partnership that we have built with BNP Paribas and the value we provide to corporates. Our hope is that Kantox’s technology, combined with BNP Paribas’ liquidity and robust customer portfolio, will see a new generation of treasurers embrace the value that FX automation provides.”