Photo of Denise Aptekar, Upwork.

Upwork and its bank have developed a solution that allows this company to use guaranteed FX rates and book transactions in a completely automated way that did not create additional tasks for Upwork’s Finance or other teams.

The challenge:

Historically, Elance.com and Upwork.com required payment from their business customers in US dollars only. However, that meant that non-US companies were required to manage any FX conversions themselves, often paying hefty fees to their banks or payment providers and waiting for their statements to gain transparency into whatever rate they paid for their FX. Small businesses without sophisticated treasuries were therefore open to unwelcome FX risks, while larger businesses had the overhead of managing these exposures.

As Elizabeth Tse, SVP, Operations explains, the company decided something should be done to address this issue. “Upwork wanted to remove this risk from our customers and provide local currency pricing for their benefit,” she says. “However, it was important to us that our customers receive competitive FX rates, and that Upwork have transparency into the underlying price source.”

The solution:

Working with Citi FX, Upwork was able to develop a solution that allows the company to use guaranteed FX rates and book transactions in a completely automated way that did not create additional tasks for other company departments like finance.

The solution is incredibly straightforward. Once a day, Citi FX sends a set of FX rates that are guaranteed for 24 hours. Both Elance.com and Upwork.com then use those rates to price amounts due from their business customers in their own home currencies.

Throughout the day, as customers make payments in their local currencies, Elance.com and Upwork.com systematically send to Citi FX the transaction details. Those transactions are netted, and FX trades are automatically generated to the varying dates when funds will be received.

Best practice and innovation:

This is a fully automated solution without the risk which is captured and fully hedged at a micro-transaction level. There is no slippage between exposure generation and hedging that is typically seen at the treasury level, where hedges are often placed days or even months after underlying exposures are created.

Systematic, automated hedging removes potential error from manual intervention or fallible human ‘views’ on currency forecasts. Pricing is sourced from fully transparent, auditable market fixings, providing certainty of best execution. Leveraging technology to remove FX risk while going beyond the typical treasury mandate and creating actual incremental value to the existing business model.

“The Upwork solution is tailored to the company’s specific set of needs,” says Tse. “It has resulted in an improved customer experience and value proposition and fully hedged risk at the point of exposure creation. This has a direct impact on the company’s bottom line.”

Quickly implementing this service was important to ensure an equally competitive offering in the market. As Upwork is a high-growth company, the solution had to easily scale to handle increasing volumes and eventually cover new markets.

In summary, this solution allows Upwork to:

• Enhance its value proposition.
• Offer a more global experience to its customers without incurring FX Risk.
• Rapidly expand into new countries with little or no additional treasury resources needed.

“The implementation of the full end-to-end solution for Elance.com took only a matter of a few months,” adds Tse. “After implementation, Elance.com merged with Upwork.com and the solution was extended to offer these currency choices to Upwork.com business client customers as well.”

Key benefits:

• Cost savings.
• ROI.
• Time taken to implement solution and realise benefits.
• Process efficiencies.
• Yield enhancement.
• Pricing enhancements.
• Risk removed/mitigated.