Getting better control over cross border transfers

The rapidly changing payments sector is presenting new challenges for businesses. With transactions being processed instantly – even across borders – businesses used to the buffer of traditional settlement cycles and low FX volatility are now struggling to manage cash flow as they are not taking into account the impact of processing small international payments.

The acceleration of clearing and settlement times is part of a much bigger picture. Fulfilment expectations of consumers and businesses alike have increased exponentially in the last few years, and payments have been somewhat lagging behind. With this increased demand, many organisations have not prepared for the impact of serving a global marketplace when it comes to managing the ‘insignificant’ international payments that they process on a daily basis, with little to no consideration being made for liquidity.

Typically, organisations have a good handle on regular, frequent and sizeable payments. However, it is often the smaller, under-the-radar payments made informally that add up and begin to cause significant impact upon cash flow.

Cash management issues were alleviated in part by the introduction of Single Euro Payments Area (SEPA) initiatives, which have streamlined the way in which European payments are made. However, in more volatile markets, such as India and China, where a great deal of manufacturing and service industries base their operations, the impact of making a huge number of small FX payments to these destinations may be getting overlooked.

Many organisations view payments, FX and cash management as separate entities, when in fact they should be viewing them as one for better cash flow and profits. By managing all three under a single point of control, there are a huge number of benefits to be had including being able to streamline the treasury, improved forecasting by planning ahead for making FX transfers, being able to inform suppliers with exact dates for receiving payments, and saving a huge amount of time.

The difficulty comes with deciding how to consolidate smaller FX payments and manage the FX risk in a highly volatile market without disrupting the legacy cash flow model. In a recent study nearly 75% of businesses cited currency volatility as the biggest challenge in managing FX risk. Fortunately, new innovations are making the process of consolidation and risk management easier.

Banking Circle offers its members low FX rates and minimised currency risk through direct sourcing access to a 15B Euros daily FX liquidity pool, and enables its members to be in full control of their funds through a segregated IBAN account. This provides a way of consolidating payments and FX to improve cash management.

To see how Banking Circle can help your organisation get better control over the way it processes cross-border transfers, contact us to find out more today.

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