The Future of FX in embedded finance

19th March 2021
The Future of FX in embedded finance

Last week, OpenPayd hosted the latest instalment in our Banking Unlocked webinar series, in which we discussed the future of FX in embedded finance.

Our panel consisted of Veronica Studsgaard, Founder and CEO of iAMTN, Alana Parsons, COO of Caxton FX, Digby Try, Head of Sales at OpenPayd, and Daniel Webber, our moderator and the CEO of FXC Intelligence.

What impact has the introduction of UX and tech-first players had on the FX industry?

Digby said that Revolut provided a new benchmark by putting real-time, live-rate FX in customers’ hands. This change was a huge improvement for customers but it’s worth noting that less digital firms have also grown during the same period, so UX and tech-first can’t be the only factor. 

Veronica said that COVID has been a catalyst for digitisation in those firms that had been a bit reluctant previously. UI and UX are really important factors in the remittance space nowadays and they help to attract more customers. Even though every business is looking at costs after the challenging year we just had, they know how important it is to focus on UX.

Alana said it’s incredible what has changed from 10 years ago, when fax machines were still used to communicate. Apple and Amazon have made everything so easy and quick that customers expect this from every industry. Now, the experience is all about eliminating disruption for the customer.

Which product offerings provide the best opportunities for differentiation for FX firms?

Digby said that API-driven solutions that plug and play allow you to quickly add a new proposition to meet client needs. The firms that are most successful tend to be very judicious about what they plug in, so that it really adds value. For FX firms, a good opportunity might be travel, where a customer’s FX requirements could be covered with their booking. He said it was surprising that no one has really nailed this yet.

Veronica said remittance companies are showing what is possible by extending into financial services, including lending, insurance and paying bills. It’s very important to get the UI and UX right and think about how it all works together. You need to be able to customise your platform for different business models, regulations and legislation. 

Alana said that FX is just part of what Caxton does and it's more about payments and the whole experience of moving money from A to B. It’s also about making services that are more ‘front of wallet’, which is why they created a card. With the rise of fintech, customers are now more trusting of other players coming into the market and offering what had been the preserve of top-tier banks.

Which embedded finance products are best suited to FX firms?

Digby said it's about services that help people manage FX better. For corporate FX, a good example is expense management on cards, where firms want a decent price but also some additional tools. Other examples might be combining crypto services or prepaid cards with FX. It’s really about offering what is complimentary.

Veronica said that remittance firms should focus on adding ‘on time’ services. For a migrant sending money home, the FX price is important but the ability to have it in the other place when it’s needed is crucial. 

Alana said that, when you’re selling to corporate customers, it’s all about saving them time and money and doing it in a way that adds to the overall proposition. Expense management is a great example of where digitising the receipt process can save a firm thousands of pounds a month.

What are the main differences for firms focused on consumers compared to those focused on businesses?

Digby said that, for consumers, you can’t ignore the role that social networks like Facebook might play. It seems like an obvious addition for these firms to allow people to pay across their social network but regulation must be getting in their way right now.  

Veronica said that it's also worth considering the difference between markets. For example, it can be difficult for UK firms to enter the Nordic market because of technology challenges and other business factors, and these issues shouldn’t be forgotten.

How can FX firms capitalise on the opportunities presented by the embedded finance era?

Digby said it’s about using APIs to automate the FX element behind the scenes. CEOs want solutions that allow them to scale and reduce the risk of FX while doing so. It’s about integrating in the background to fix any issues, so the customer interface is seamless.

Veronica said integrations are key and it’s about making sure these integrations fit with different business models.

Alana said it’s not about building things from scratch, it’s about making partnerships. If you ensure your technology is up-to-date, you can seamlessly integrate with other people’s API endpoints. 

Which other sectors are most likely to add FX as an embedded product and increase competition further?

Digby said there is quite a big opportunity for embedding FX into marketplaces, which are experiencing friction because of the new regulations they must deal with. Also, in the shipping industry, there are issues around when FX payments arrive, so this would be another area to watch. 

Veronica said that lockdown has created a lot of new investors amongst young people and this brings with it a need for FX services that they had only previously required when travelling. Similarly, gaming is another area where these customers are increasingly requiring FX.

Alana said that travel is the obvious sector where FX is needed but beauty is another area that has been talked about a lot. Also, within payments, there is still room for growth amongst acquirers and card schemes.

Which geographic markets provide the best opportunities?

Digby said that, even after Brexit, there are still good opportunities for both retail and corporate FX in the UK and across European markets.

Veronica said everyone is now looking at Africa but Latin and South America provide opportunities where a lot can be done. 

Alana said South America seems to be an emerging area where a lot is being created, which could allow it to leapfrog the progress made in other locations.

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