Here is a posting in Finextra about the relatively complicated FX market and how banks in general have not adapted to a business model or systems to accommodate the needs of SMEs on cross-border exchanges. The author is with a fintech that delivers a payments platform seemingly intended to support banks in such an endeavor (although we have not had a briefing so this is an educated take). Those readers familiar with x-border and the way banks manage their FX departments will know it is a select few that scale up and it is in the form of correspondent banking services, which can tend to be a bit opaque. So the author is advising banks to get on their giddyap and move faster to solve the problem on behalf of an SME space that may be drifting away.
‘A very big shift in market appetite is occurring. While businesses like OakNorth, Shawbrook and Redwood – the brand-new challenger banks in the UK – are laser focused on serving the SME market, there is no challenger bank laser focused on serving SMEs when it comes to foreign exchange (FX). It is for this reason that we have seen an almost biblical migration of SME’s away from traditional banks to seek better FX and international payment services elsewhere. There is an opportunity here for traditional banks to leverage, and they must before it’s too late.’
I am currently at an event that is knee deep in middle market trends in payments and it seems fairly clear that banks are not ready to cede vast portions of a market that represents roughly a third of U.S. GDP (likely a similar economic dynamic across the globe, perhaps even greater). There is certainly fintech representation since they can move more nimbly so collaboration is an ongoing key, as it has been for several years. Interested parties should read through the provocative posting to gain some insight.
‘This will progress into a continued drive to further transparency in pricing, and FX will become more embedded in a payment flow as the margins will be so fine…
There has been a real shift especially when it comes to cross-border exchanges and FX, but what we’re seeing is a real desire for transparency and a real desire from customers for fairness. There is an opportunity for banks to spin up and create revenue driving propositions very, very quickly here.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
