Published: July 30, 2018
An important innovation in cross-border payments brought new transparency and real-time reference to transactions long overdue and much needed.
Decade markers are always fascinating. They pull us back, and in this modern age often inspire wonder and disbelief. When you close your eyes and think back to 2008 what memories come flooding back? Maybe a favourite beach location, a special anniversary, a personal milestone, or perhaps a less happier time like a frantic call from HQ requesting your presence to work out what a bankrupt Lehman Brothers means for the business? As far as technological milestones are concerned the iPhone was launched only a summer earlier, and is still impacting our daily lives in ways unknown and unexpected. In a pretty noisy and tumultuous 2008, Deutsche Bank’s summer launch of its FX4Cash solution delivered for a first time ever to its clients a cross-currency payables solution that can be seen now as the start of a new wave of technological change and innovation in transactional banking.
“Previous to the launch of FX4Cash, Deutsche Bank, like all banks, could process cross currency transactions but they were handled manually, or against fixed rates and provided limited ability to scale or to sell the capability to clients. Deutsche Bank were passive in this space and were behind long-established market offerings,” Jeff Smeeton, EMEA Global Transaction Banking (GTB) FX head at Deutsche Bank explains to EMEA Finance.
Deutsche Bank started to address the need for better cross-currency payment as a priority inspired in part to maintain its top-tier rankings in European cash management and in global FX. By the summer of 2007, funding was in place along with support at the high-levels of the bank leading to the formation of a joint venture between the bank’s GTB and Global Foreign Exchange business with an objective to deliver a superior product to the market within 12 months. This team created set out a clear vision of how the service could work, and the gaps in the market it would address, which included a lack of transparency, inconsistencies, use of fixed or fixing rates, and manual processes.
A year later and FX4Cash was launched with Deutsche Bank delivering cross-currency payables on time using real time rates evidenced by a date/time stamp. New technology and new infrastructure provided new offerings to the market that had not been provided before. A dedicated product specialist team was hired to grow the business, and innovation was and continues to be the mantra evolving the solution over the ten years.
The following first few years saw major enhancements. In 2009, FX Receivables was added in the same infrastructure providing real time rates and full transparency to these transactions. In 2010, the focus was on Asia and maximizing the bank’s onshore FX licences to handle the conversion of otherwise restricted Asian currencies. The bank also initiated several strategic partnerships with clients to build out consolidated transaction platforms that streamline processing and reconciliation.
“FX4Cash has constantly evolved. At the outset ten years ago, we had a view to provide a solution for our financial institutions clients who wanted to trade and see a rate in advance of transactions,” says Smeeton. “We provide this service still, but not just to the financial institutions, the functionality now extends across the client base – and in over 125 currencies. The benefit is that the banks using this real-time FX solution ‘never have to say no’ to their clients. This initial capability of seeing a live rate is now just one solution in the much larger armoury.”
Growth of the team continues in line with the growth of the bank’s GTB business where FX4Cash functionality has been expanded to locations including Russia, India, Malaysia, Korea and Indonesia to name a few. “FX4Cash has become completely integrated into the fabric of our services. GTB client accounts have access to the functionality allowing for the processing of both payables and receivables. We work with clients to understand their transactional flows and needs, requirements, and how the functionality within their account is able to assist in meeting them,” says Smeeton.
“We are proud to have been at the vanguard of bringing full transparency to the transactional FX markets. FX4Cash brought evidence of the use of a real time rate showing the date/time stamp of conversion. Even today, if clients do not receive such a time stamp then it is likely that their bank is not processing their transactions against a real time rate. This may be suboptimal as additional costs of using an intraday or daily fixed rate will be included and passed on to the client.”
Forget the fax machine, it’s a goner. Forget the video store, also boarded up long ago. What is the CEO, CFO, Treasurer, lonely hard-working entrepreneur expecting from its bank? They expect instant information and real time transactions as a starting point.
“Clients want to know their transactions are being processed in a fully STP manner at a competitive real time rate and have full transparency for both payables and receivables. No longer are clients seeking to trade each cross currency transaction manually,” explains Smeeton. “The utopia for treasurers is to receive real time data from across their entire organization and relevant partners - all sitting on a live dashboard that helps automate cash flow forecasting and liquidity management. The industry is not quite there yet, but that’s the direction of travel.”
Deutsche Bank’s Smeeton takes a big picture view of the bank’s future in this area. He expects the bank to be providing services to clients that do not maintain their main cash management relationship with the bank in part this will be done through the development of real-time treasury solutions using APIs.“Our team has a strong roadmap of where we are going. As an example some of the investment is being directed into building API connectivity that will provide deeper integration to our clients providing greater levels of STP and also to provide real time treasury solutions.”
“We as a team see consistent themes across our clients, although problems are unique and vary in complexity according to a particular customer’s needs. Fortunately, FX4Cash as a product set has an incredible array of capabilities. We are called on to assist our clients to provide a variety of FX solutions, including help repatriate funds, dividend issuances, assist with large capital injections, and support overall treasury operations.”