Published: September 01, 2010
Several enhancements to Deutsche Bank’s FX4Cash platform have broadened its functionality and increased its utility to corporate clients, says Timothy Merrell, Co-Head of FX4Cash at Deutsche Bank’s Global Transaction Banking.
In the aftermath of the recent turmoil in the financial markets and the global economy, the focus for many corporate treasurers is very much on enhancing liquidity management and improving working capital efficiency. Indeed, should concerns surrounding funding and access to credit markets return, these will be crucial factors in determining how well corporates perform.
One area where many corporates can make significant improvements with relatively little effort or expense is in the management of cross-currency payments.
One area where many corporates can make significant improvements with relatively little effort or expense is in the management of cross-currency payments – both incoming and outgoing. Payments of this type, especially where they are repetitive and of relatively lower value, can present a number of problems for corporates and the financial institutions that handle them. These include a lack of transparency surrounding the application of foreign exchange rates, the burden of maintaining multiple accounts to pay beneficiaries in different locations and the number of bank interactions required to complete the transaction – something that stems from the common practice of treating its payment and foreign exchange elements separately.
Of course, despite the difficulties, payments of this type are extremely common and are only expected to multiply as global sourcing continues to grow in popularity and linkages between markets and regions proliferate. As well as funding and facilitating trade, these transactions are often made to pay overseas workers’ remittances and make pensions payments. Yet, as volumes grow, so will the challenges.
Aside from issues of transparency and efficiency, much of the payments infrastructure in use today is based on technology that is now several decades old. Many institutions are unable to invest sufficiently in new systems and as volumes grow, so does the risk of such systems failing – something that potentially presents a reputational risk for the institutions involved.
Developing alternatives to the current way of dealing with such cross-currency transactions has been on the transaction banking agenda for some time. Indeed, Deutsche Bank has invested heavily in bringing to market a solution that overcomes many of the difficulties described above. Launched in late-2008, the FX4Cash platform addresses both the foreign exchange and payment elements together in order to bring new levels of transparency and efficiency to corporates making these types of payments.
As part of a broader effort to look at how bank structure affects the provision of products and services to corporate clients, FX4Cash was developed as a joint venture between the Global Transaction Banking (GTB) and Global Markets (GM) areas of the bank. We are likely to see a great deal more co-operation of this type as synergies continue to be developed between these two closely-related areas. Drawing on GTB’s payments expertise and GM’s market-leading foreign exchange trading platform, FX4Cash gives corporates fully transparent FX information at the point at which the rates are being applied – rather than treating this as a post-payment factor. As well as giving corporates the confidence that they are getting the best FX rates available at any particular time, this timely provision of information is also crucial to allowing corporates to manage their cash and liquidity positions more efficiently – something that has grown in importance to many since the drying up of credit markets during the recent financial crisis.
Since the launch of the FX4Cash platform some 18 months ago, a number of new releases and updates have expanded its functionality. For example, 50 new currencies were recently added, meaning that users can now make and receive payments to and from over 150 different countries. This ability to manage incoming – as well as outgoing – cross-currency payments is also a new feature and the support with technical and legal issues that the platform provides can be crucial, especially when dealing with more exotic currencies in emerging and less developed markets.
Flexibility is one of the hallmarks of the FX4Cash platform.
Indeed, flexibility is one of the hallmarks of the FX4Cash platform. Compatible with a range of access channels – including SWIFT, Eurogiro and Deutsche Bank’s own proprietary systems – it is suitable for a range of applications in many different scenarios, as evidenced by the large numbers of corporates – in sectors as diverse as IT, legal and shipping – that have adopted the platform since its launch. [[[PAGE]]]
While the focus of the platform has certainly been on driving greater transparency and efficiency in corporate cash management, FX4Cash can also be used by financial institutions to enhance their offerings to their own client base as well as potentially opening up new revenue streams. Consolidation among providers, the tough economic climate and harmonisation initiatives such as the Single Euro Payments Area (SEPA) have led to margins in payments processing coming under increasing pressure and partnering with an institution such as Deutsche Bank will be an increasingly attractive option for many smaller providers.
While Deutsche Bank is experiencing the same market conditions as its peers, a sustained programme of internal investment – that began before the crisis started and is continuing – has allowed the bank to continue to innovate. In this respect, FX4Cash represents one example of this continued innovation and forms part of broader efforts to ensure that both corporate and financial institution clients have the necessary tools to negotiate whatever hurdles the global economy may present them with in the coming months and years.
For further information, please contact Timothy Merrell, Co-Head of FX4Cash, Global Transaction Banking, Deutsche Bank at [email protected] or visit www.db.com/fx4cash
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