e-Forex-May-23

Exploring the upside for
Commercial Banking in FX
By Niels van Daatselaar, Co-Founder and CEO of TreasurUp
since the early days of this millennium.
generation FX, for example based
In 2000 both 360T and FXall entered
on AI or smart analytics engines in
the market and became very successful
specialist magazines, websites and
for large corporate flow, especially after
social media. Even though these new
2010. Many different brokers have also
technologies are very interesting to
entered the market at that time. During
further optimize FX trading, they are
the last few years, numerous Fintech
usually geared towards institutional and
companies have taken a slice of the pie
rather professional corporate users with
for FX. A lot of them combine this with
dedicated treasury departments. On
payments.
the SMB client side, on the other hand,
PRODUCT DEVELOPMENT
Niels van Daatselaar
Foreign exchange (FX) - the largest
market globally in terms of daily
volume - has been the bread and butter
for decades for many banks. Most of
this volume comes from institutional
trading, but the corporate part
contributes significantly when it comes
These ‘new’ players have much to offer
to SMBs: quick and easy onboarding,
virtual accounts, sharp pricing, easy
connectivity and most of the time
nice online journeys. However, there
are also things to overcome for these
parties: having a narrower product
offering, requiring companies to deposit
collateral sometimes, not always
having real bank accounts, a much
there seems to be upside potential just
around the corner.
HOW CAN COMMERCIAL
BANKING INCREASE ITS FX
TOP LINE?
Whether it would be through clients
trading more because of better
hedging or taking (back) some flow
from the non-bank competition, banks
have good playing cards to begin with.
to margin revenues.
lower credit rating than most banks
Banks have the balance sheet, the
and no (substantial) front office for
payments accounts, the specialized and
Next to that, corporate FX remains
consultations and support.
trained front office staff, the IT power
a typical flow product and therefore
and above all: the total set of financial
‘door opening’ product for relationship
When looking at the channels being
solutions that SMBs require.
managers and treasury advisors. The
market for FX products has seen quite
used - see the BIS graph below -
one can conclude that single bank
THE UPSIDE AREAS
some developments for corporate
platforms remain an important factor
1. Cross-Border Payments
small and medium-sized business
in day-to-day FX trading. It also shows
The seemingly small distance to the
(SMB) users. During the last few
that still, depending on the region, a lot
payments journeys of SMBs as well
years, banks have been seeking ways
of FX trading is done by phone. This is
as the Cash Management/Transaction
to increase their FX competitiveness
not just the case for institutional flow.
Banking for the Markets team remain
beyond pricing. The question arises:
TreasurUp has learned that for example
exception cases. Not many banks
what strategies can banks implement
in Latin America, certain parts of Asia,
have integrated the worlds of FX and
for improving their single bank FX
Africa and Europe many FX Sales
payments fully in a sense that they
propositions?
people in dealing rooms are still picking
can provide client-specific spot rates
WHAT HAPPENED TO BANK FX
OFFERINGS?
up the phone for plain vanilla spot or
forward transactions.
to payments now and in the future or
on the back of outstanding forward
contracts. Pre-validations and payments
Banks have seen a lot of competition
Banks where online FX has fully
trackings are also not common in most
entering the market for corporate FX
matured are promoting their next
offerings.
46 MAY 2023 e-FOREX