Driving Efficiency in Cross Border Payments with smartTrade

Unlock the full potential of payments efficiency with smartTrade’s CBP platform: Your key to strategic FX management and global transaction excellence

Corporate treasurers know the importance of payments efficiency; risk, liquidity, expenses, governance, and capital structure are all impacted by how efficiently a business manages its payables and receivables. The goals are straightforward: to limit risk, manage cash flow, and reduce operating costs. The firms that get it right treat the effort as a journey and focus on the principles and tools necessary to get the job done. Let us briefly look at the principles of payments efficiency and then consider some of the tools useful for putting these principles into effect and the specific case of cross-border payments. 

Here, in ascending order of importance, are some key tenets of payments efficiency:

  1. Remove paper: In fact, not simply paper—eliminate those processes and technologies that require or generate paper such as faxed documents and signature requirements. For most of these requirements, online or digital workflows are not only more efficient, they are more secure.
  2. Automate: Any payments activities that add little value and are low risk should be automated. Even better, why automate when you can eliminate? Eliminate what is not essential and automate the rest.
  3. Straight-through-processing: In the treasury context, STP is the elimination of both manual steps and unnecessary gaps between processes and systems. STP can be accomplished by linking systems and processes so that one action triggers another (with appropriate controls and safeguards) and the process can be viewed in its entirety.
  4. Cash flow visibility: Cash flow management cannot occur without visibility of actual cash flows: cash unseen is cash unmanaged.  

Efficiency in practice: FX Integration.

Cross-border payments pose unique risks: they are larger, require more information and have higher transaction and opportunity costs. The close integration of FX and payments capabilities–that is, FX integration–can help address these risks. 

FX integration allows firms to design and execute currency management strategies in concert with payments needs and cash management best practices. Specifically, a firm can utilize a variety of hedging tools and execution types as part of a broader FX strategy and then settle these trades directly into payments both planned and ad-hoc and do all of this within a single platform. This offers several benefits:

  1. FX Effectiveness: Without integration, firms must either separately execute their FX transactions and then allocate foreign currency for payments as they arise or, in far too many cases, simply pay in domestic currency and leave payables FX risk completely un-managed.  In either case the effectiveness of the firm’s FX strategy is blunted.
  2. Visibility: FX integration surfaces payments flow and FX transactions for all users. Looking ahead, this facilitates cash forecasting, FX strategy, and payments execution. Looking back, this allows users to follow cash flows across currencies and see the domestic source of a foreign currency payment or the reason for an FX transaction.
  3. Harmonization: The entire infrastructure of control and risk management from entitlements, separation of duties, transaction limits, approvals and reporting can be created and maintained in a single platform.
  4. STP: Integration also facilitates straight-through processing for FX transactions and cross-border payments: transactions can flow automatically between domestic funding and foreign currency delivery without manual intervention or switching platforms. Compliance and AML information can be attached and shared throughout the transaction lifecycle. 

Efficiency in Action: Cross-Border Workflows

FX integration goes a long way, but cross-border workflows are needed to finish the journey. These are workflows designed to take advantage of FX integration and bridge the functional gap between domestic and cross-border payments. Cross-border workflows allow users to execute a payment before, after or independently of an FX transaction. Individual users can be streamed into the settlement flow (pre-trade, post-trade, payments-first) best suited for their processes. For users, this means that they can create and manage payments on their terms rather than work around the limitations imposed by most payment platforms. The benefits of cross-border workflows include:

  1. User experience: Effective workflows bridge the gap between domestic and cross-border payments. Users with little FX experience can create payments with ease and confidence.
  2. Template payments: Users can template payments with FX for future or recurring transactions and fund those payments with the most effective FX product and tenor ranging from simple Spot transactions to Forwards & SSPs, Single Rate Agreements, Time Options, and bulk transactions. Settlement can be integrated into FX transactions to save double entry, trade duplication, and other processing errors.
  3. Improved payment timing: Payment timing—a common concern for treasurers—can be improved with payment cut-off inclusion at the time of FX trade entry. This gives FX traders the information necessary to align FX value date with payment cut-off times so that payments are received on time and no sooner than necessary.
  4. Splits and netting: Lastly, payment and funding transactions can be split or netted as desired to reduce transaction entry work and manage cash-flows across all currencies.

FX integration and cross-border workflows form the basis of an efficient and effective FX payments experience. smartTrade’s FX and global payments platform, Commercial Banking and Payments (CBP), is built from the ground up around these crucial capabilities and with them, we will help your clients on the journey to payments efficiency.

Chris Gibson – Director of Product Management, Payments

Begin Your Journey to Unparalleled Payments Efficiency: Choose smartTrade’s CBP Platform Today. Dive into the world of strategic FX management and cross-border payments innovation to empower your finance operations. Let smartTrade be your guide to seamless, secure, and superior payment processing. 

Contact us for a consultation on how we can help transform your business.