When corporates look for growth, overseas markets are often high on the list of options. Accessing new customers in fast-growth economies, or sourcing suppliers in lower-cost areas, can make all the difference to growing revenues and profits.
With the growth in international trade comes an increase in demand for cross-border USD payments and foreign exchange services. For banks, this should be an opportunity as corporations often turn to their local banking providers to execute those cross-border wire transfers.
However, many smaller banks lack the infrastructure, the accounts and the mechanisms to handle the currency conversion of these payments themselves. Therefore, it is often the recipient bank that converts the transfer into the local currency of the beneficiary. In this scenario, the sender may lack transparency on what rate will be applied to the payment and how much will arrive at the beneficiary, which can lead to customer dissatisfaction. In addition, they are allowing the recipient bank to determine most of the FX spread revenue that goes with the transaction.