BCR Publishing
We are the leading provider of news, market intelligence, events and training for the global receivables finance industry.
Working with industry leading organisations, experts, governments and universities, BCR Publications delivers expertise in factoring, receivables and supply chain finance to a global audience.
BCR has long been a beacon of innovation and excellence in the realm of receivables finance, playing an instrumental role in shaping the industry’s international landscape. Through its comprehensive conferences, insightful publications, and thought leadership, BCR has facilitated crucial dialogues and connections among industry professionals, driving forward the development of receivables finance globally.
The real value of Multi-Dealer FX trading platforms
16-08-2021 | treasuryXL | Kantox
(Spoiler: it’s not about trading costs)
A few years ago, PwC consultants proposed a clever analogy to illustrate the difference between single-dealer platforms (SDPs) and Multi-Dealer Platforms (MDPs). For banks looking to provide products and services to corporate clients on a platform, SDPs are like an airline’s website, where high-margin sales occur. Multi-Dealer Platforms, in turn, are the equivalent of online aggregators that let customers compare fares and schedules. While the former emphasizes customer relationship intimacy, the latter work as “transactional supermarkets” with a higher degree of automation.
When it comes to the corporate FX market, where spot and forward transactions take the lion’s share in terms of traded volumes, Multi-Dealer Platforms like 360T and SWAPs have been the venue of choice. The shared technology of Multi-Dealer Platforms has enabled them to better adapt to changing customers’ needs than the proprietary technology of most Single-Dealer Platforms. As a result, corporate treasurers have moved en masse to Multi-Dealer Platforms to improve FX trading processes and reduce spreads. As Kantox’s CEO Philippe Gelis argues, the success of Multi-Dealer Platforms has resulted in a spectacular “compression of FX spreads for vanilla products”.
Beyond trading costs: the value proposition of Multi-Dealer Platforms
Lower FX trading costs, the natural result of the Multi-dealer platform proposition, play an important role by facilitating the participation of firms who see a benefit in ‘embracing currencies’ to access new markets and grow their business. But the fixation with lower spreads is unwarranted. Going forward, treasurers will care less about paying 9 bps instead of 10 bps, if a 2% move in the exchange rate can be easily and efficiently handled by an automated hedging program.
To see where the real value of Multi-Dealer Platforms lies, let us start by briefly looking at the three phases of the FX hedging workflow: pre-trade, trade and post-trade.
The pre-trade phase involves sourcing exchange rates for the purpose of pricing as well as capturing and processing the relevant exposure. Once the FX trade is executed and confirmed, the post-trade phase kicks in with reporting and performance analytics as well as accounting and payments and collections.
In this increasingly automated series of steps, MDPs play a key role. Kantox’ partnership with 360T, for example, provides straight-through processing integration for corporates of all sizes to tailor their Multi-Dealer Platform setup to execution and routing rules of their own making. The range of functionalities includes:
What emerges from this picture is clear: the ‘trade phase’ of the FX corporate workflow is being automated at lightning speed. The reduction in spreads, while important, only tells part of the story. The real value proposition of a Multi-Dealer Platform lies elsewhere: they are an integral part of the seamless, end-to-end management of corporate currency workflows that Currency Management Automation solutions provide.
This process of automation comes with an added bonus: Application Programming Interfaces (APIs) ensure that data can flow seamlessly between different systems (ERP, TMS) without any need for spreadsheets, reducing spreadsheet risk and freeing up valuable treasury resources.
When viewed in this broader dimension, as part of a larger process that includes all the phases of an automated FX hedging program, Multi-Dealer Platforms are part of an ecosystem that allows companies to benefit not only from automating, one by one, the different phases of a hedging program but to have all these processes integrated with one another, thus creating more value than the sum of the parts.
GO TO PARTNER PROFILE
How to set up a forward contract and lock in a rate for your business
12-08-2021 | treasuryXL | XE |
A forward contract gives you and your business certainty, allowing you the peace of mind to have confidence that your international exposures are taken care of.
At Xe, they work with businesses of all sizes across many industries. They recognize that each business has its own requirements for its payments, and thus do they offer a diverse suite of money transfer products and solutions in order to meet each business’s international payment needs.
Let’s say that you’ll need to make a payment in the future. Right now, the rates are in your favor, but your payment is weeks or even months away, and you’re worried that the rates could change in the coming weeks, which would make your upcoming payment much more expensive than it would be now. You can’t influence the markets, but is there anything you can do to avoid feeling the brunt of currency market volatility?
In that case, the forward contract would be the right solution for you. Let’s take a closer look at what that is and how it could help your business.
What is a forward contract?
A forward contract is an agreement to buy or sell an asset at a specified price on a specified future date. In the context of money transfer, this is how it works:
You specify which currencies you’d like to exchange, and get a quote at the current exchange rate.
You select the date on which you’d like to send this transfer, and provide all necessary recipient and payment information.
On that date, the transfer will automatically trigger, and will convert and send at the previously established rate.
You could think of it as the “buy now, send later” money transfer option. You’ll do the work of setting up the transfer now, and your currency exchange will happen at the current exchange rate, but the transfer itself won’t happen until the date you’ve specified.
Why is a forward contract useful?
A forward contract can be useful in two ways: allowing you to lock in your rate to avoid future volatility, and to ensure that your payment will be sent (and delivered) by a certain date.
Changes in currency values can dramatically impact the cost of your business money transfers. If the currency that you’re sending weakens, or the currency you’re transferring to strengthens, a simple payment could suddenly become much more costly for your business. A forward contract gives you and your business certainty, allowing you the peace of mind to have confidence that your international exposures are taken care of.
Additionally, if your payment needs to be delivered by a certain date, arranging your payment in advance can ensure that it will be sent on time. No matter how busy things get leading up to the transfer date, you can rest assured that your payment is taken care of.
How to set up a forward contract
If you’re interested in setting up a forward contract and securing a rate for your business’s upcoming money transfer, give them a call to set that up with our team. If you don’t already have a Xe account, take a look at their guide to registering for a business account.
Get Started
Get in touch with XE.com
About XE.com
XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.
Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.
Your company money is safe with XE, their NASDAQ-listed parent company, Euronet Worldwide Inc., has a multi-billion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have truly global coverage.
Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you the detailed information.
Visit XE.com
Visit XE partner page
Strength in Numbers: A Community-Based Approach to Fighting Digital Payments Fraud
11-08-2021 | TIS |
This article provides a modern review of the tactics used by cyber criminals to target enterprises with fraudulent schemes and also evaluates the primary methods used by companies for defending against digital payments fraud. This is followed by an introduction to TIS’ innovative Payee Community Screening (PCS) solution, which addresses payments fraud on a global scale by curating a community-based network of trusted beneficiaries, vendors, and bank account information that enterprises can use to verify the legitimacy of their outbound payment instructions.
Enterprise Payments Fraud in 2021 is More Elaborate & Subversive than Ever Before
Within the past year alone, thousands of finance and treasury practitioners across the world have learned through bitter experience that digital payments fraud is rarely orchestrated by your average, everyday criminal.
Rather, the vast majority of today’s technology-oriented attacks, particularly those that target large enterprises, are led by sophisticated, well-funded, and innovative fraudsters.
In many cases, these software-savvy perpetrators are working on behalf of state-sponsored actors or underground “black-hat” organizations. And because these groups are well-organized and well-funded, they can provide members with the latest technology and training. Ultimately, this has led to rapid digital innovation within the criminal underworld, and subsequently to a growing frequency of highly-orchestrated payments fraud attacks against the corporate environment.
Consisting primarily of software hacks or malware attacks, many of the most prevalent forms of fraud in existence today involve numerous layers of subterfuge and deception, which is necessary for bypassing the various security controls that organizations have in place. Common examples include the use of cleverly disguised Business Email Compromise (BEC) schemes, “Man-in-the-Middle” tactics, invoicing fraud, and the use of ransomware or other forms of “system takeover” fraud.
But of course, enterprises are not entirely helpless in defending themselves.
What Payment Security Tools Does a Modern-Day Treasury Group Utilize?
If you’re operating in a role with direct access or authority over an enterprise’s outbound transactions, you could probably name a broad number of tools at your company’s disposal for detecting and preventing payments fraud.
Some quick examples?
When initially establishing internal payment protocols, most companies will require clear segregation of duties between each stakeholder in the payment process. This includes dual or multi-user approval controls for executing, reviewing, and approving payments. Other standard security components, such as the use of encrypted Wi-Fi networks or VPNs, help restrict access to the enterprise’s digital software to only trusted sources. IP safe-listing tools provide even greater control over who can access these internal systems. As users log in, configuring multifactor authentication (MFA) tokens to be used in conjunction with standard usernames and passwords is another effective technique that prevents unauthorized users or personnel from accessing payment systems via stolen credentials. Biometric versions of these MFA tokens, such as fingerprint or retinal scanners, may be leveraged for even greater security. And finally, user auditing software is often adopted by companies to help monitor the activity of various personnel within their payment systems in order to detect suspicious activity, such as a login attempt from an unknown IP address, at an odd time of day, or from an obscure world region.
When all combined together with regular employee testing and training, these various security techniques have proven very effective for combating most forms of digital treasury and payments fraud in existence today. And in the years ahead, these tactics are expected to remain as core features of most enterprise’s fraud prevention strategies.
However, suppose that the criminals targeting your organization are not launching direct attacks against your internal payment systems or architecture, but instead decide to infiltrate the operations of your suppliers and partners.
Their reasoning?
Although your enterprise might have the appropriate defenses in place for preventing direct hacks and internal breaches, are your controls just as effective at identifying anomalous activity that is perpetrated through the guise of a trusted vendor?
For a surprising number of enterprises today, the simple answer is no.
Successful Fraudsters Learn How to Operate Outside the Purview of Enterprise Visibility
Although many of the fraud attacks that garner widespread media attention are those that result in millions or billions of losses in a single swoop, these are not the only types of attacks that organizations should be worried about.
In reality, many of the attempts perpetrated by criminals are not targeting billions of dollars. Instead, they focus on extracting smaller amounts of funds over time, often by disguising their activity through the lens of normal business operations.
Take, as an example, fake invoices submitted by criminals that are designed to mimic one of the thousands of vendor or supplier payments that a global enterprise makes every month.
Usually, vendors are submitting invoices to enterprises via email, an online e-commerce platform, or via an ERP system. Subsequent payments are then delivered from the enterprise to the various recipients whose invoices have been approved, usually as an account-to-account transaction that goes directly to the bank account listed in the invoice.
However, suppose that a criminal is able to infiltrate the email account, e-commerce platform, or payment system used by one of your vendors. And over time, the criminal monitors the activity and communication that occurs between this vendor and your enterprise and learns how to mimic the workflow, presentation, and delivery of new invoices for payment.
In this scenario, the criminal knows that your company is receiving hundreds, if not thousands, of new invoices from a variety of vendors every day. They also know the average dollar amount of each invoice delivered by particular vendors, as well as the frequency and timing of their submissions. And if an email account or e-commerce platform has been hacked, they have also probably been studying the language and messaging that the vendor uses to correspond with you.
After taking time to evaluate these invoicing and communication processes, the criminal will create a falsified invoice using the same email address or payment platform that you’re familiar with. The invoice will probably be for the same amount and to the same beneficiary that you’re used to paying, but with a slight variation to the underlying bank account details.
The typical result being?
Unless you are actively tracking and inspecting the vendor records, bank account numbers, and beneficiary details for EVERY payment initiated by your enterprise to your global network of partners and vendors, then catching these attempts will be incredibly difficult.
But if your company cannot catch this errant invoice the first time, then what is going to stop the criminal from submitting numerous invoices over and over, or even going on to target other vendors within your network and duplicating the process on a broader scale?
It might sound like an Ocean’s 11 heist on paper, but in reality, these types of attacks occur all the time. In fact, a single instance of invoice fraud cost Amazon nearly $20 million in 2020. Other forms of fraud, such as BEC schemes, cost a combined $12.5 billion for organizations in the same timeframe, and these numbers are not decreasing over time.
Instead, they are continuing to rise.
Introducing a New Way to Quickly Identify Suspicious or Fraudulent Payment Details
Although subversive types of fraud attacks like the invoice example above are difficult for large companies to identify, suppose there were a way to quickly scan all vendor and supplier payments in real-time against a global library of beneficiary and bank account data?
Going a step further, what if you could also scan outbound transactions being delivered to first-time vendors against a community ledger of payments data in order to verify that the underlying account details and remittance info have never been flagged as suspicious or fraudulent by other enterprises?
With this functionality, the threat of fraud being perpetrated through more obscure and subversive channels become much easier to identify, and they go a long way in protecting your enterprise against attacks that spawn through exposures related to your partners, vendors, and suppliers.
This suite of tools is exactly what TIS is now providing enterprise clients with our innovative Payee Community Screening (PCS) solution.
Developed in direct response to a noted increase in invoice and BEC fraud, TIS’ PCS network works by aggregating payments data across our trusted community of global enterprises and bank partners. As new payments are submitted by various enterprises through TIS, this module compares the underlying beneficiary and bank account information against a comprehensive record of all other transactions executed through the system, including those made by other enterprises in the network.
In practice, this validation process effectively protects against four fundamental threats:
In this way, by inspecting every outbound payment initiated by your enterprise in real-time against a global library of payments information, enterprises can strengthen their security controls by accessing a much broader pool of data and information than what is available in-house. To date, TIS’ network has managed over 11 billion payments globally across 11,000+ banks and 15 million+ distinct beneficiaries, which makes our library of payments information virtually unparalleled in the market. And now with the addition of PCS to our solution suite, we can better protect our enterprise clients from fraud by confirming the validity of every outbound transaction they are attempting to make.
In an environment where subterfuge and deception are a criminal’s main assets, these community screening techniques are essential for ensuring that fraudsters cannot bypass your controls simply by infiltrating those of a different company within your network. They also ensure that as soon as fraudulent or suspicious payment info is identified by one enterprise, the data can be quickly shared across all other enterprises in the network for purposes of quickly halting subsequent payments to that account or beneficiary.
For TIS’ enterprise clients, these tools are already becoming a pivotal component of their core security structure, and we are excited to continue deploying the solution across more global enterprises in the months and years ahead.
Learn More About How PCS Can Bolster Your Treasury & Payments Security
Although no single tool should ever be relied upon to defend against all forms of fraud, it is strongly recommended that enterprises making hundreds or thousands of vendor payments every day undergo a thorough evaluation of their payment controls. More specifically, treasury and AP teams should take time to analyze whether the threat of invoice or BEC fraud leaves them exposed, especially if a vendor or supplier within their network is compromised.
For enterprises that identify gaps, we invite you to learn more about how TIS can help.
For more information about TIS’ PCS tool, the associated benefits, and the technical aspects associated with its architecture, download our latest factsheet. You can also request a meeting with one of our payment experts or learn more about the other security-related components of our solution suite.
Stay vigilant, stay safe, and as always, thank you for reading.
About TIS
TIS is reimagining the world of enterprise payments through a cloud-based platform uniquely designed to help global organizations optimize outbound payments. Corporations, banks and business vendors leverage TIS to transform how they connect global accounts, collaborate on payment processes, execute outbound payments, analyze cash flow and compliance data, and improve critical outbound payment functions. The TIS corporate payments technology platform helps businesses improve operational efficiency, lower risk, manage liquidity, gain strategic advantage – and ultimately achieve enterprise payment optimization.
Visit tis.biz to reimagine your approach to payments.