Fintech-Based Foreign Exchange Services Create Options for Small Institutions

currency icons in tech blue coloring
By Joe Krzywicki

3 minutes

Offering international wires, payments and transfers may help credit unions serve more members better.

Today, many credit unions are searching for ways to increase revenue by broadening membership beyond traditional affinity or select employer groups and even beyond the local community. At the same time, there are an unprecedented number of mergers with other credit unions. While these initiatives should be applauded, credit unions also need to expand their services to compete more effectively in the financial services marketplace.

One offering to consider is offering international payment and foreign exchange—or “forex”—services. Although forex was once considered the domain of large banks serving international business clients, the explosion of global e-commerce and international, cross-border transactions have made it more important.

Credit unions that do not currently offer forex are missing an opportunity to retain and grow members who want to send money home or do international payments. Further, credit unions that outsource it are enabling potential competitors and, due to the lack of transparency, potentially exposing members to less than competitive rates. Delivered with transparency and integrity, forex represents a sustainable revenue stream and a tool to build stronger and more loyal relationships by delivering more of the member’s banking needs.

The good news is that there are now forex solutions that drive down the transaction costs for the member, with complete transparency and predictable fees. Using these solutions allows credit unions to better compete for their members’ business.

How Members Benefit From Forex

For members, such forex services as international wire transfers are an important way to move money to, or from, another country. For example, an individual on a work visa might send funds back to their family, a college student studying abroad might need to receive money internationally to help them pay tuition and living expenses, or a company may need to pay to a worker.

Although many credit unions offer some type of foreign exchange or international payments capability for their members, these services typically require working with a large, disconnected provider to process the transactions. Although large providers deliver a workable solution, there is little focus on the member experience, nor incentive for the provider to share commissions. Due to the relatively low volume of these transactions, there is also no motivation to offer competitive rates.

If members send funds in U.S. dollars, they ultimately pay more for the transaction. After fees, for example, $100 might become $78 when deposited. In addition, many times there is no way to predict the exact cost of the transaction, how it is calculated, or how long it will take to arrive.

Fintech-Fueled Solutions

Fortunately, forex solutions for smaller credit unions allow them to deliver the service directly, with competitive rates for members, increased profit margins and greater transparency. Forex service providers that can drive down the costs for low-volume users and small-dollar transactions can eliminate a significant percentage of the cost by aggregating the volume and having multiple FX liquidity providers bid on each member’s transaction. The bidding occurs seamlessly behind the scenes, and the member benefits from more competitive rates.

This can be coupled with fintech solutions that further facilitate these transactions. Acceleron Bank, for example, has created software that is embedded within Fiserv’s Payments Exchange that utilizes an application programming interface to exchange information safely between the applications.

When the forex solution is already integrated into a system such as Fiserv’s Payments Exchange, implementing the forex service can be as simple as selecting it from a drop-down menu. Because it is part of the existing technology system, partners and processes, there is no significant learning curve for members to use it. The credit union can simply “turn on” the service and begin processing forex payments in just a few days.

With this approach, many of the pain points of utilizing forex technology and the barrier to entry have essentially been eliminated. This gives credit unions the ability to compete, take care of their members’ needs, and pass along savings or generate non-interest income.

Joe Krzywicki is EVP/chief marketing and sales officer for Atlantic Community Bankers Bank. ACBB partners with Acceleron Bank to provide a digital, integrated FX payment solution to help financial institutions boost their performance and serve their communities.

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