Guaranteed FX rates, multicurrency netting, automated foreign exchange conversion and APIs are just some of the tools on hand for treasury teams seeking to improve cross border payments and remittance flows, and take advantage of open banking, digitisation, and new payment technologies.

Daniel Stanton

Managing Director, Head of Transactional FX – GTS

The speed of globalisation is increasing. The world markets are becoming further interconnected and interdependent. Change is a constant. As a result, more and more companies of all sizes are now operating on an international scale, including those in the shared and gig economies, which often introduce new preferences and behaviours by various counterparties. All of this translates to accelerated growth of cross-border payments and remittance flows, propelled by the trends of open banking, digitisation, and new payment technologies.

As a result, the job of a treasurer is also evolving. Adding to the complexities of global transactions are new risks, including:

• Dealing with increasing market volatility and geopolitical impact.
• Managing cross-border exposures.
• Dealing with accounting, forecasting and reconciliation tied to foreign exchange operations.
• Addressing complexity of intercompany flows and different operating currencies.
• Complying with local jurisdictions and regulations.
• Mitigating transactional, counterparty, operational and economic risk.

Banks are responding to these changes in the cross-currency payments landscape by offering tools that leverage new technology and innovation and help mitigate risk, gain efficiency and improve transparency.

Guaranteed FX rates

Guaranteed FX rates lock in the foreign exchange rate for a pre-agreed tenor up to 180 days. After parameters – timeline, currencies, transaction limits – are determined, FX rates are delivered to our client. Once live, transactions within pre-agreed parameters will be priced at the Guaranteed FX rate. This solution provides visibility and predictability, and a buffer against foreign currency volatility.

Multicurrency netting

Managing cross-currency inter-company payments can be complex, costly, and prone to manual errors. Improving this process is essential to reduce costs, manage risk, and streamline settlements. Instead of entities settling directly with each other, FX Netting can aggregate your inter-company payables and receivables into a single location. This means just one single payment, significantly reducing the number of settlements required.

Treasury teams can combine Guaranteed FX rates with Multicurrency Netting to elevate their experience. Marry the calculation and execution of FX rates, by locking in a spot FX rate for a period of time, typically up to 12 hours for a netting programme. This provides sufficient time to utilise the Guaranteed FX Rate to calculate positions, finalise participant settlements and execute FX trades.

Automated foreign exchange conversion

Often, a corporate will send US dollars to a beneficiary overseas. This can be to their disadvantage as the recipient bank converts the transfer into the local currency of the beneficiary and can add costly lifting fees. The sender may lack transparency on what rate will be applied to the payment and how much will ultimately arrive at the beneficiary, which can lead to disputes or discrepancies. With this solution, cross-border USD payments are converted into the local currency of the beneficiary before the payment is sent. It incorporates cutting-edge artificial intelligence and machine learning and reads the outbound payment details and determines if the beneficiary account is held in USD or in local currency. The result is an accurate, agreed upon receipt for the beneficiary as well as lower costs for the sender.

FX receivables

Our FX receivables solution can help enhance the collection process by automatically converting incoming foreign currency payments into your home currency. FX receivables helps reduce the number of currency accounts that need to be maintained, as well as greatly eases the reconcilement and accounting process of transactions. Moreover, it can improve straight through processing, accelerate cash flow and help cash forecasting.

APIs

API, or Application Programming Interface, are a communication protocol used between two or more applications or programmes to exchange information. APIs connect systems directly, simply, and quickly to initiate requests in real-time. APIs give you flexibility to design your solutions by the means of an ecosystem where all processes are connected in a smart, efficient way, providing you a seamless uninterrupted workflow. APIs are very common in the marketplace, with applications including such functions as FX trading, payment initiation and reporting. API’s broad spectrum allows treasury to establish a direct connection to your bank, with real-time data exchange and information flow.

Paperless foreign exchange for restricted markets

Certain restricted markets in Asia-Pacific have currency controls in place and require original paperwork to document FX transfers. Working with regulators, Bank of America implemented a paperless solution with electronic submissions, allowing the bank to review documents online and process transfers for clients. It’s an approach that’s been available for a few years, but the COVID pandemic accelerated demand.

Having expert guidance is key to global payments success

Treasury professionals face multiple concerns and risks that come with cross-order commerce. For some, the greatest risk is not being prepared for rapid globalisation of the business. These businesses may be on the very leading-edge of digital transformation, but that doesn’t necessarily translate to having the specific regional expertise and knowledge to tackle the complexities of handling payments around the world.

Ultimately, the key to leveraging the latest payables and receivables innovations is to work with a trusted advocate that not only keeps up with the growth of its clients but is at the leading edge of what is driving growth around the world. Bank of America complements innovation with the right touch to ensure businesses have the treasury intelligence needed to succeed on a global stage.