Historically, there has been a significant barrier to entry for community banks and credit unions to fulfil their customers’ foreign exchange (forex) transaction needs. They lack in the technology platforms and the in-house forex expertise. Hence, they have had to rely on correspondent banks to service their customers. The fast-growing fintech sector is bringing forex solutions to smaller community banks and credit unions.
When the forex solution is already integrated into Fiserv’s Payments Exchange, implementing the service can be as simple as selecting the option from a drop-down menu. The community banks can quickly begin capturing this valuable additional revenue stream while building stronger and more loyal customer relationships. Andrew Dillard of Acceleron Bank, in formation, a digital correspondent bank that provides forex technology solutions for community banks and credit unions said that traditionally, community banks have forfeited forex revenue when working with correspondent banks. Now, there is software that levels the playing field so small community banks and credit unions can deliver a forex service.
Many community banks and credit unions offer some type of foreign exchange or international payments capability for their customers. Correspondent banks provide a good service, there is little incentive for them to share the fees. Dillard added that Correspondent banks are focused on maximizing their own margin on each transaction. If the forex experience is less than satisfactory due to high fees or lack of transparency. Given the explosion of global e-commerce, cross-border transactions are more important than ever. Companies can make payments in local currencies and receive payment in their home currency through a suite of international payment types, by Forex services.
Dillard said that Forex should be considered a strategic tool for community banks and credit unions. It represents another revenue stream. According to Dillard, some banks see fintech applications as disruptive technology. Acceleron Bank has created software that is embedded within Fiserv’s Payments Exchange that utilizes an Application Programming Interface (API).
The secure web-based Fiserv Payments Exchange is already used by many small banks. Security features include customized authorization levels, dual controls, and data encryption to protect the privacy of the wire transfer data. Dillard explained that the capability for a small bank or credit union to offer a competitive forex service is likely already built into the system they are already using. When that is the case, there are no incremental costs to start, and the option is almost immediately available to implement.
When integrated into Fiserv’s Payment Exchange, the current processes wire initiation, approval, and release processes remain unchanged. The Acceleron software is based on having multiple correspondent banks bid on each customer’s transaction. The bidding occurs seamlessly behind the scenes, with the customer benefitting from more competitive rates. The pain points of utilizing forex technology and the barrier to entry have essentially been eliminated. This is about giving these smaller financial institutions an ability to compete, generate new revenues. It is about levelling the forex playing field.