The FINANCIAL — Transactional FX is where international payments are converted at a point in the payment value chain where the currency conversion benefits the originator bank, rather than just the beneficiary bank as has traditionally been the case.
Already a leading player in this space, Barclays has recently upgraded its transactional FX platform to support more countries and currencies. This kind of processing system requires constant updates to reflect immediately any changes in payment flows and behaviours. Handled by a dedicated group of product experts, Barclays will be adding more functionality and the ability to further fine-tune the processing per originating bank.
Many financial institutions now expect their banking counterparties to provide this functionality, but few organisations are currently providing a service that is processing a high number of payments efficiently on an STP basis across a larger number of currencies, which requires a sophisticated system.
Joerg Pinkernell, Head of Financial Institutions Product Management, Barclays, said: “There has never been more of a focus on transactional banking, as FIs place greater emphasis on maximising revenue sources that are reliable and do not have a major balance sheet requirement. Regulation and competition is only speeding this up.
“Therefore transactional FX has certainly climbed up the agenda in the past year or two for a growing number of financial institutions, as they look to participate in the revenue their clients’ transactions are generating.”
The key differentiator in this area is the ability to identify the currency of the beneficiary account in combination with the ability to customise the process to the requirements (e.g. client base) of the originating bank. A service operator should be able to offer a larger number of countries to avoid different conditions for the originating bank’s clients.
Pinkernell says Barclays is one of a few select operators promoting global transactional FX at Sibos, and it is still an area that is generating significant interest across the event.
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