Private Label Solutions: Making the Right Choice for FX Services

In the latest installment of our Treasury Services Expert Conversation series, Mark Ridley, Treasury Services Regional Head of Relationship Management for North America Financial Institutions, focused on Foreign Exchange (FX) capabilities. [i]An earlier part of the discussion focused on broad treasury management services, and in an upcoming installment, we will cover trade document outsourcing.[/i]

What outsourced solutions does BNY Mellon offer in around FX and what are their benefits?

Ridley: Many regional financial institutions do not offer international wires to their underlying clients. There are also institutions who, for one reason or another, initiate U.S. dollar wires to the New York correspondent of the overseas beneficiary bank. So when it comes to lifting fees and queries such as beneficiary claims non-receipt, the remitting bank does not have much power or sway in negotiating with the intermediary. Outsourcing allows banks to consolidate their international wires via one channel, with harmonized and tailored fee schedules. When a beneficiary claims non-receipt, BNY Mellon makes it a priority to reach into the beneficiary bank in order to resolve the issue. This scale ultimately helps smaller or regional banks compete on a level playing field with U.S. global banks.

In the case of BNY Mellon’s FX service, because we do not directly compete with the regional banks, they can rest assured that they don’t risk losing their corporate and retail clients by partnering with us for international payments or trade services. We’re not on the same street as their branches.

Beyond that, many regional and smaller institutions keep their ledgers in U.S. dollars and therefore are not offering multicurrency accounts so it’s imperative they give alternative options via FX. Through outsourcing or ‘partnering’, our clients can give their clients access to over 120 global currencies, a huge leg up for them.

How else does outsourcing help clients benefit their own underlying clients?

Ridley: Rather than just explaining features, we also engage with the regional banks’ own client-facing staff. We help them understand what services are available to their clients through us.

A good example would be a U.S. corporate who imports from China, but requests to be invoiced in U.S. dollars because they believe their local bank is unable to handle foreign exchange into CNY. We encourage our client’s sales teams to explain to their corporate clients that importers will mark up a transaction by as much as 20 percent to take into account any FX exposure during the collection period. The ability to invoice in the local currency means the importer will pay less in U.S. dollars, the exporter removes their FX risk which subsequently improves the relationship between the importer and exporter. Furthermore, the salesperson demonstrates international expertise, which enhances the relationship between the regional bank and their client.

As with all of our outsourced solutions, I would also call out the consultative service that we provide. We help banks analyze their end client product usage and point out areas where they could anticipate client needs with a more efficient or cost-effective offering. For example, we can look at a client’s U.S. dollar flows and we track which countries U.S. dollars are flowing to. We can show our client which of their clients are predominant users or high users of flow into those particular countries, and highlight the impact of theoretical conversion rates into those currencies.

At the end of the day, it’s all about giving them an advantage with their clients that they would not otherwise have.