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What should you know about SWIFT system transfers?

| 09-12-2021 | Xe | treasuryXL | LinkedIn 

The SWIFT network is well-known and used by banks around the world, but it may not be the best channel for you to send your money transfers through.

The Society for Worldwide InterbankFinancial Telecommunication (SWIFT) network, which was founded in Belgium in 1973, handles about half of the world’s cross-border fund transfers. As international commerce has grown, the SWIFT network has grown commensurately. It handled about 2.5 million daily transactions in 1995 and more than ten times that many in 2015.

But SWIFT is not a bank. It does not even touch the money which passes along its network. Instead, SWIFT sends payment orders to correspondent accounts at member banks. As such, SWIFT is strictly a bank-to-bank transfer service.

If you’re sending a money transfer with a bank, you’ll become acquainted with the SWIFT system. But is it the best channel to send your money through? We’re not so sure.

What does the SWIFT system mean for you and your money transfers?

  • Added fees. In order to be members and transfer through the SWIFT system, banks are charged SWIFT fees. To counter this, both the recipient and the correspondent bank usually add fees to SWIFT transfers. Somebody, either the sender or the recipient or a combination of both, must pay them.

  • Bad exchange rates. There are some hidden currency transfer costs, at least in most cases. Currency exchange rates vary in different markets and at different times. Banks routinely choose the worst possible currency exchange rate. Then, they quickly move the money to another marketplace and pocket the difference.

  • Long transfer times. As mentioned above, SWIFT completes “most” of its transactions within thirty minutes. In this case, “most” means about half. Some transactions could take several days to process. Other delays, such as large transfer amounts or first-time users, could delay the process even more.

How does the SWIFT network work?

Today, SWIFT connects about 10,000 financial institutions in about 200 countries. That sounds sweeping and impressive. But most of its transfers go through fewer than two hundred banks, brokers, clearinghouses, and corporations.

Furthermore, SWIFT is the industry standard for linguistics and code, even for non-SWIFT institutions like Xe. SWIFT works with various international organizations to set content and format standards for messages and transactions. In other words, the network infrastructure usually handles codes as opposed to account numbers and other sensitive information. That’s one reason SWIFT is so secure.

Another reason the network is secure is that its three data centers in the United States, Switzerland, and the Netherlands communicate with each other via subterranean or submerged cables. These communications channels are difficult to hack.

SWIFT upgraded its network infrastructure in 2001 and again in 2008. Not coincidentally, 2008 was also the year international funds transfer prices went up significantly. As part of the upgrade, SWIFT required all member institutions to replace their bilateral key exchange encryption hardware with a Relationship Management Application. Member banks gladly passed these costs along to consumers.

How secure is the SWIFT system?

2008 was a long time ago in technological terms. The smartphone you had back then, assuming you had one, probably looked like one of those World War I field telephones compared to the one you have now. Yet 2008 was also the last time SWIFT did any major security upgrades.

The network paid the price in April 2016. Hackers used malware to steal about $81 million from the central bank in Bangladesh. The malware intercepted the supposedly unbreakable SWIFT codes and also covered the hacker’s tracks. Perhaps most disturbingly, SWIFT admitted that these thieves, or ones similarly equipped, had tried this before.

A few months later, an Ecuadorian bank sued Wells Fargo after the latter allegedly honored a $12 million fraudulent transfer. Hackers obtained canceled transaction requests, altered the amounts, and submitted them.

Questions continue about the network’s security. Some banks claimed they have lost money to hackers in much the same way. These allegations are under investigation.

Can you make money transfers without using the SWIFT system?

Yes, you can! Many banks and providers utilize the SWIFT system to send their money transfers due to its security, efficiency, and well-established reputation, but some providers instead opt to use other channels (or even create their own channels) to send money transfers.

Do you want an example of one such provider? Well, now that you mention it…

Sending money with Xe

SWIFT might be the largest international funds transfer platform in the world. But in terms of security, efficiency, privacy, and a few other areas, it falls short.

So, if you need a reliable and affordable way to send money overseas to family or friends, give Xe a try. We send money through our own money transfer channels, which means that we aren’t on the hook for additional SWIFT system fees and delays—and neither are you.

But don’t worry: our channels are still completely secure. We adhere to regulatory standards in every country that we do business in, with bank-grade security measures to ensure that your money and information are completely safe


Does Your Business Need Protection from FX Uncertainty?

| 02-12-2021 | Xe | treasuryXL | LinkedIn |

Don’t have a bank account? Want to have cash on you? In those cases, cash pickup could be the money transfer method for you.

One of the most interesting aspects of what the XE Business Solutions team does is having relationships across a broad range of industries. It helps our team curate unique insights into the various pressures and financial models being used by all the businesses we work with. The relationships our foreign exchange sales consultants build fine-tune their understanding of regional business sentiment and common international best practices.

There are many viewpoints on how to treat fast-moving FX rates. Some simply hope that the market will self-correct over time. Others make best-effort forecasts to try to understand all possible currency value directions of currency prices. From our vantage point, we see that businesses which are exposed to significant risks are more likely to achieve their objectives by employing a hedging program.

Foreign Exchange Volatility is a Universal Business Challenge

Big brands are just as susceptible to market movements as any other business segment. Currency volatility can impact profit margins if not managed correctly. Earnings reports are replete with warnings to shareholders pertaining to the value of assets and cash flows being affected by unmanaged or unexpected shifts in values of currency.

Looking deeper into hedging behaviours, enterprise-level businesses have a tendency to employ rich hedging programs and while it is by no means necessary to emulate their level of complexity; certainly the point regarding ‘best practices’ is clear.

Here are some insights on how the ‘big guys’ see ForEx risks across the globe as a result of their survey of corporations (Deloitte 2016 Global FX Survey and IMP Exchange Rate Risk Measurement and Management working paper: Issues and Approaches for Firms):

The top three reported ‘Primary hedging objectives’ were defined as:

  1. Reducing income statement volatility

  2.  Protecting cash flows

  3.  Protecting consolidated earnings

In terms of strategy, the breakdown of risk management strategies is as follows:

  • 8% of those surveyed employ a static or annual hedging programme (buying once a year)

  • 31% use a rolling hedge but a flat amount (buying monthly, quarterly etc)

  • 28% actively hedge using a rolling hedge strategy increasing over time to seek to average rates

  • 33% use ad hoc or hedging by situation

The survey found that global corporate hedging strategies consist of these approaches:

  • Hedging using a financial instrument like a forward contract or option – 89%

  • Naturally hedging through balancing buying and selling in the same currency (some or all of the exposure) – 58%

  • Passing costs to suppliers or customers – 28%

  • No FX risk management practices at all – 2%

These breakdowns further:

  • Using a FX forward or Non-deliverable forward – 92%

  • Using FX Options – 30%

  • Using specifically FX Option collars – 15%

It is always interesting to get a look into the strategies employed by others and particularly the way that large, professional companies approach managing a key part of their risk program.

The key takeaway is that almost all of the companies Deloitte surveyed are hedging using some kind of financial tool specifically designed to provide consistency and protect cash flows.

Probably a much higher percentage than many would think are using Options products and rolling hedges over on a regular basis as part of a specific policy that guides them in virtually any market condition. Some real food for thought there….

Currency Market Analysis

Here is today’s market recap:

GBPEUR – The Pound maintained its position yesterday and this morning against the Euro as many traders await details on what steps Members of Parliament will take when it opens next week. Labour has indicated they will seek and emergency debate on Brexit next week but no information regarding a no-confidence vote is yet available.

GBPUSD – The pound is expected to come under pressure in general as the suspension of parliament is seen as increasing the chances of a no-deal Brexit. With this in mind, it appears likely that we could test and break the 1.2060/1.2015 level downwards, which likely will open up losses against the Dollar of some significant ground.

EURUSD – While the trading calm remains in the pair, there is a chance hard economic data will begin to outweigh hard sentiment from the ECB. Germany reported a decline of 2.2% in Retail Sales in July (on top of a downward revision). Consumption is largely propping up the German economy and this is slowing as well. A potential risk for euro weakness exists.

Please contact us for more info about your international payments or log in.

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Figuring Out your Company’s FX Requirements

| 25-11-2021| treasuryXL | XE | LinkedIn

There is no crystal ball that can accurately tell you the future of where a currency will trade in the short, medium or long-term.

 

When looking to partner with an FX provider, your first priority should be to evaluate the payments your business has made previously in order to get a better idea of the FX products and services that will best fit your business’ needs. And, when selecting a provider, make sure they understand your industry and the jurisdictions you are making payments to.

1. Frequency

How often are you making (or will you make) international payments? Making overseas payments costs more per transaction. The more payments you make, the more critical it is to get the cost per transaction right.

2. Amounts

The amounts you transfer affects the overall cost. Smaller amounts will have a higher margin added, therefore it’s worth determining whether you can bundle your payments to sharpen the margin you attract.

3. Timing

With exchange rates constantly fluctuating, the timing of your payments will have an impact on your overall profitability. If you do business in areas where currency valuations are highly volatile, an FX provider which can effectively advise you about the risks and opportunities of short or long-term foreign exchange contracts is ideal.

4. Industry

Each industry is different when it comes to the three factors above. Therefore, selecting a provider that understands your industry can make a big difference, as they’ll often be able to suggest the best foreign exchange service offering for your type of business.

Your business is as unique as you are. Don’t settle for generic money transfer services which treat your business as a number on a spreadsheet.

5. Geography

Finally, when selecting an FX provider, make sure they understand any regional nuances particular to the jurisdictions you are sending your money to – this will ensure your payments go through smoothly, and in a timely manner.

Taking the time to understand these five factors is the first step in taking control of your business’s FX requirements and will put you in good stead when selecting the right FX provider for your business.

Ready to learn more?

Download our essential FX Guide for Aussie and Kiwi businesses.


The hidden secret behind the different types of foreign exchange exposure

23-11-2021 | treasuryXL | Kantox | LinkedIn

Fresh from leaving the famous Genesis rock band that he helped found, songwriter and musician Peter Gabriel came out with an innovative album called Exposure, where his fascination with electronics and new recording techniques was openly on display. In the eponymous song, he kept on droning the E-word over and over:

Exposure
Exposure
Exposure
Exposure
Exposure

Expert-led Conversation | The Digitalisation of Treasury: Your FX Risk Management toolbox for 2022 | 30 November 2021

treasuryXL | Kantox

 

Date & time: November 30, 2021 at 9.30 am CET | Duration 45 minutes

2022 is just around the corner, and we want to make sure you’re armed with the best technology tools to help push your treasury department to the next level. 

Join Kantox and TreasuryXL in this expert-led conversation on the future of FX risk management and the treasury trends to tap into in 2022.

Simplify your global business payments

18-11-2021| treasuryXL | XE | LinkedIn

 

Whether your business needs to process 3 or 150 international payments a month, learn how you can make payments to 220+ countries within your own business applications, and benefit from:

• Faster automated payment processes
• Savings using bank-beating exchange rates
• More accurate reporting by eliminating manual errors
• Secure transactions by validating payment data before it’s sent
• Transparency by receive tracking and reporting of each payment to its destination
• Flexibility to send to multiple currencies in a single file upload

Xe enables you to achieve everything a third-party payment provider has to offer, directly from your own business applications.

 

5 reasons why integrating Xe Global Business Payments into your own business applications will help power your business:

1. Improve your Financial Reporting
Xe Global Payments within your own business platform allows you to automatically reconcile foreign currency exchange rates directly at time of transaction. This means no more duplication or transferal of data from one application to another. Greater accuracy means greater transparency and visibility on your financial reporting, enabling you to make more confident business decisions.

2. Protect supply chain relationships and staff in overseas offices
If you are paying suppliers overseas, you want to ensure that your supply chain is protected, that you have full visibility on expenses so that your customer base is not impacted by any delays or rise in cost. And if you need to pay staff overseas you want to ensure they receive the right amount, on time, every time. By using Xe Global Business Payments within your own platform, any errors with bank account details are immediately highlighted, giving you time to rectify any costly mistakes.

3. Stop paying more than you should
Xe’s preferential exchange rates typically save you typically more money than if you used your bank for your business global payments. When you streamline your payment processes using Xe Global Business Payments in your own application, you are saving time on every overseas payment. That means you can save both time and money.

4. Improve speed and accuracy of high-volume, time-sensitive payments
It’s so important to have strict data verification and validation processes. We verify payments before they’re sent, so we can quickly flag any unsuccessful payments. For example, our system has a table of rules for each of the different payout currencies we offer. If you uploaded a payment to Brazil without a bank CLABE number, it would tell you it’s missing. Sending certain currencies can be extremely problematic, so we take out the guess work and make sure payments get where they need to go.

5. Get the right specialist support
A solution can only be as good as the support it offers. At Xe, we understand the daily challenges global Finance functions face. Our support team establishes a good rapport with clients and get to grips with the practical and technical elements of resolving problems quickly and efficiently. Our experts are available around the clock, to resolve issues no matter where clients are located or what time zone they’re in.

By using Xe Global Payments within your Microsoft Dynamics 365 or Sage Intacct applications, you can streamline your international payments process, and benefit from quality customer service and support from Xe’s front and back-end operations.

 


Junior Market Risk Manager @ Knab

Amsterdam – Full-time Read more

Junior Global Treasury Associate @ Aegon

The Hague – Full-time Read more

How To Expand Your Business Overseas

11-11-2021| treasuryXL | XE | LinkedIn

As a growing business, expanding overseas can present a lot of exciting opportunities. However, it also requires some careful thought as it can seriously disrupt your existing business activities – even if only temporarily. Therefore, it’s vital that business owners looking to expand have fully understood the impact this will have on the day-to-day running of the company, as well as determining whether the rewards are going to outweigh the risks. If going overseas is the next important step for your business, that’s great news, but knowing where to start can be tricky. You need to gain a deep understanding of the competition, local market, whether you’ll need new office space and how you’ll build your international team.

That’s why we’ve put together this guide. Below, we’re going to take a look at eight steps you must take when expanding your business overseas if you hope to succeed.

Read on to find out more.

1. Perform due diligence

Following on from what we said above, before you expand overseas, it’s crucial that you understand the marketplace, competition and the risks. The best way to do this is to perform a deep dive due diligence. This should involve:

  • A market segmentation analysis to determine if your product will be well received in the local market

  • A product gap analysis when compared with other local goods or services
    Competitor analysis

  • Your market opportunity/sizing

  • How you’ll need to grow/adapt your team to cater for your international expansion

By doing so, you can determine whether this is going to be the right move for your business and your workforce whilst weighing up the risks and rewards.

2. Put together a detailed strategy and business plan

As with any new business decision – especially one of this size – a detailed strategy and business plan need to be created. This needs to take into account the specific economic, cultural, governmental and market conditions in the local area.

Your strategy should include your short, medium and long-term goals, and it should set out your metrics for measuring success. It’s also important to create a budget, tactical plan, key dates and marketing strategy.

By putting together a localised strategy in this way, you can stay on the path to success whilst ensuring that your move overseas stays in line with the overall business goals and objectives.

3. Create a frontline team

When moving your business overseas, it can be tempting to quickly try and build a local team from scratch. This can be extremely time-consuming, risky and means your expansion is not going to get off to the best start.

Instead, you should consider relocating some of your key senior staff, even if the move is just temporary. By relocating proven and talented members of your team to your overseas location, you can hit the ground running.

After all, they already know the business, so they can get things set up. They can then help with the recruiting process to ensure that you employ local people who fit with the company culture and can continue to drive the business forward. This will obviously take a bit of work and lots of incentives to have staff members be willing to relocate but taking most of the stress out of it with luggage shipping and providing temporary housing is a good start.

4. Make sure your goods or services are prepared

Your gap analysis should have highlighted any areas of weakness, so you need to take the necessary steps to get your goods or services ready for the new local marketplace. This means:

  • Making changes to ensure your goods or services stand out from existing offerings

  • Determining whether you need to localise your goods or services. For example, does the name translate OK into the local language or does it need changing?

  • Getting a patent and trademark review to ensure your ideas cannot be duplicated by another local provider

  • Conducting tests and quality assurance to ensure your goods or services are up to local standards

  • Starting to build a local logistics and distribution network

5. Determine your organisational readiness

A one size fits all approach will not work when it comes to moving your business overseas. This is because the different languages, regulations, laws, customs and cultures will impact how you implement business policies and procedures.

Therefore, you need to make sure that your business can be flexible and accommodate these differences. You also need to evaluate your current structure and whether this will work in another country.

Not only this, but you need to decide on the average salaries, compensation packages and types of benefit programs you’ll be able to offer to your workforce. Remember, if you want to attract talented local professionals, you need to offer competitive packages.

6. Create a marketing strategy

When entering a new market, you need to make sure you have a go-to marketing strategy in place to help you effectively sell your goods or services overseas. This requires a strong sales model and methodology, as well as a pricing model that reflects the local market.

You also need to make sure that your branding will be well received by your new international customer base and create a marketing strategy that shouts about this.

7. Consider your legal readiness

Just as with your organisational readiness, you also need to make sure that you have all the necessary legal documentation and regulations in place, especially because some countries can be very litigious. If you’re unsure what you need to do, it might be time to get a professional opinion before spending time and money expanding overseas.

By ensuring that you get all the right local commercial agreements in place, review any local industry regulations and just generally stay proactive, you can mitigate the risks of legal action or problems further down the line.

This also includes getting the proper tax and finance infrastructures set up so that your foreign branch of the business is adhering to all local corporate policies and procedures.

8. Start establishing relationships with local businesses

The final step in this guide is to start establishing relationships with local businesses to give your own business a strong competitive advantage.

In doing so, you can create a supporting ecosystem of complementary products and services by working closely with local providers. For example, this could be manufacturers, shipping and courier services or local banks.

Now you’re finally ready to make the leap; you should be all set up financially, legally and with a team of talented professionals ready to help expand your business.