The challenge
As Ant Group expands to serve more customers around the world, its global fund functions also need to grow to cope with higher volumes of payment, as well as prevent inefficiencies and limitations that could impact customers and their increased demands. The group faced several challenges that needed a comprehensive solution.
Decentralised FX and liquidity management – FX and liquidity were being managed by local geographical entities as opposed to centrally managed, resulting in a sub-optimal account and liquidity structure, and a lack of central visibility over fund movements.
Costly overdrafts (ODs) and funding shortage – as Ant’s main funding currencies are USD and Chinese yuan (CNY), it would need to constantly draw on ODs to cover any funding shortfalls in local currencies (LCY) or had to sell USD (or CNY) to buy LCY on a transactional basis, resulting in additional FX costs on top of OD costs.
Fund efficiency constraints – without a global liquidity structure, Ant operated its global treasury funds solely from Singapore and this resulted in value-dating within the Asia-Pacific time zone. In addition, the speed of non-APAC collections and payments was compromised, as they were done via accounts based in Asia Pacific.
Ant needed to upgrade its fund management function to address these pain points and create a next-generation treasury management structure that is able to support its business growth in a scalable and sustainable manner.
The solution
As a key part of the treasury transformation journey, Ant Group set up Alipay Global Markets Singapore (‘AGM’) to centralise FX services, liquidity management and settlements.
In partnership with J.P. Morgan, Ant applied to AGM a comprehensive solution, the first-of-its-kind in scale, complexity, and level of detail for a leading global payments company, with the following features:
- Global FX and liquidity centre (FLC) structure for AGM connecting five global treasury hubs in Singapore, Hong Kong, Luxemburg, New York and London, covering more than 40 currencies and over 100 currency pairs across 60 entities. Highlights included:
- Three levels of liquidity structure, including global USD cash concentration, multi-currency notional pooling and local multibank sweeping structures.
- Access to local clearing systems established across the five treasury hubs to enable cross-border collections and allow local payments, resulting in quicker movement of funds and lower clearing costs.
- A customised FX mechanism for 40 currencies and over 100 currency pairs to be centrally executed and settled in the fastest and most cost-effective manner.
- Leveraging virtual account management (VAM) to provide real-time visibility, insights and reporting to AGM at both the subsidiary and affiliate levels. Further deployment of J.P. Morgan’s API technology, alongside Ant Group’s AI, data science and machine learning technologies for liquidity forecasting.
Best practice and innovation
The implementation of the solution was delivered in a record time of six months from March to August 2020, despite the COVID-19 pandemic that has caused widespread business disruptions. A solution of similar scale would usually take at least one year.
Key benefits
- Cost savings.
- Funding efficiencies.
- Superior customer experience.
- Extended service window.
- Scalable and future-proof operating model.
- Effective multi-currency liquidity risk management structure.
“To Ant and the FLC team, this is more than an award. It reinforces our confidence to bring our services to more users and merchants around the world through Ant’s technology and innovations, and to achieve our vision of helping everyone enjoy inclusive financial services.
“With this success, I believe that our partner banks are also encouraged to enhance our global partnerships, and to create more inclusive financial products together with us by building on this solid foundation,” says Kelvin Li, Head of Ant Group Global FX and Liquidity Centre.
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