Providing information at each stage in the transaction process has become essential to enhance the customer experience and build confidence and trust.
Increasingly, treasury and finance professionals are expecting a comparable degree of integration, transparency and transformation in their banking transactions, whether they are buying or selling domestically or cross-border.
The next step in payment efficiency
The quest for payment and collection efficiency is nothing new. Many companies have already achieved a high degree of visibility, control and efficiency in their payments and collection processes. Not only is the use of electronic payment instruments and processes now prevalent, but treasurers and finance managers are successfully introducing automatic reconciliation and account posting, centralised flows through payments/collection factories, and efficient techniques such as payments-on-behalf-of (POBO) and collections-on-behalf-of (COBO). These solutions are allowing companies of all sizes and located in all jurisdictions to streamline and automate their payments and collections regionally or globally, and reduce the number of accounts that they operate.
For many companies operating internationally, however, the final missing element of the transaction process is the foreign exchange (FX) component.
Depending on the industry and business model, most companies will need to pay and/or receive cash in multiple currencies. As a result, they need to maintain accounts in different currencies, and are subject to FX risk. Treasurers can choose to manage FX risk separately in the FX market, but this option is typically only open to treasuries with the necessary systems and resources in place, and/or for currencies in which exposures are sizeable. In some cases, currency specific regulations will make it more difficult to hold centralised current accounts. For smaller currency exposures, and for smaller treasury functions, it is not cost- or risk-effective to manage these exposures separately. Consequently, treasurers are seeking integrated solutions that extend the payment and collection efficiencies they achieve for domestic transactions to cross-border and cross-currency transactions while managing FX risk.
Combining market leading capabilities
For BNP Paribas, as a market leader in both wholesale FX and transaction banking, combining these two capabilities was an obvious step by integrating the Global Markets transactional FX solution, FX+, into the payment and cash management solutions.
According to Wim Grosemans, BNP Paribas Cash Management Competence Centre: “We can now support clients’ international cross-currency payment and collection requirements by converting foreign currency flows automatically. Our cross-currency payment solution is already available to clients in 12 countries in Asia, 6 commercial centres in the Middle East and 14 countries in Europe, covering 132 currencies, with the rest of Europe and North America to follow during the course of the next two years.
By integrating the FX risk management into an outgoing or incoming payment, cross- currency payments reduce the administrative burden and cost of maintaining multiple foreign currency accounts and reduce the FX risks to which the company would otherwise be subject. Clients benefit from transparent, auditable, automated end-to-end transaction processing, from execution through to FX conversion and reconciliation.”
Cross-currency payments in practice
There is considerable demand for BNP Paribas’ cross-currency payments solutions from clients. These have ranged from large multinational companies (MNCs) building regional or global payment factories, which may include POBO, through to small and medium-sized companies.
Wim Grosemans:“When we first launched the BNPP cross-currency payments solution, we expected that the largest MNCs would have less need for integrated cross-currency payment and collection solutions than small or mid-sized companies or those lacking a sophisticated treasury function. We have found, however, that, as treasurers of MNCs are expert in quantifying risk, the cost of managing this in- house, and the value of integration and automation, they have shown considerable interest in the benefits of cross-currency payments. These clients have spanned sectors as diverse as shipping, manufacturing, travel and retail.
While the solution is equally applicable to collections, companies that have significant numbers of both payments and collections in a particular currency are likely to prefer a dedicated currency account to manage that currency. Cross-currency collections are ideally suited to companies that receive payments in a particular currency but have no offsetting liabilities in that currency, receive a small number or value of payments in a particular currency, or receive payments at unpredictable intervals or unexpectedly.”
BNP Paribas Group, second quarter 2019 results
The business of BNP Paribas was up this quarter in a context where economic growth remained positive in Europe but slowed down, implying expectations of a continued low interest rate environment.
Director and Chief Executive Officer of BNP Paribas, Jean-Laurent Bonnafé:
“BNP Paribas delivered in the first half an increase in net income at 4.4 billion euros. Revenues were up thanks to business growth in the operating divisions. Operating expenses were well contained and benefitted from the transformation plan, generating a positive jaws effect. The common equity Tier 1 ratio rose to 11.9%, illustrating the Group’s solid balance sheet. New digital experiences rolled out for customers are a success and the Group is actively executing its ambitious policy of engagement in society. I would like to thank all the employees of the Group for their dedicated efforts to achieve these good results. ”
BNP Paribas Group, first quarter 2019 results
The business of BNP Paribas was up this quarter for the three operating divisions with in particular a gradual upturn in the business of CIB. Economic growth slowed down in Europe but remained positive. After the crisis in the markets at the end of 2018, the market context remained lackluster at the beginning of the quarter, but improved towards the end of the period.
Director and Chief Executive Officer of BNP Paribas, Jean-Laurent Bonnafé:
“BNP Paribas delivered a good level of result this quarter, at 1.9 billion euros. Revenues were up thanks to business growth in the operating divisions with in particular an upturn in client business at CIB. Operating expenses were well contained and benefitted from cost saving measures, generating a positive jaws effect.”
Do companies really want a more sustainable world?
Yes, the success of our Sustainable Business Ateliers is good proof of that. Most companies are aware of their social responsibility, but some are in need of information. To help them on their way, BNP Paribas Fortis organises regular regional Sustainable Business Workshops. Last year, our bank organised two pilot sessions in Liège and Limburg and more recently it was the turn of Namur, Gits (in West Flanders) and Ghent. Other Belgian cities will be announced soon.
During the Sustainable Business Workshops the invited clients are inspired by the experts from our Sustainable Business Competence Centre, and by other clients who speak about the actions they have already taken with their business.
After the presentations, participants are divided into groups and share experiences led by a moderator.
How do clients rate them?
Feedback from the participants revealed that the focus on cooperation and networking opportunities are the greatest advantages of the Workshops. Those attending always include representatives of small, medium-sized and large businesses from a variety of sectors - a diversity which participants find highly enriching. After all, no single company can overcome all of the present challenges on its own. Companies will not only have to cooperate with one another, but also with the government, universities, startups, etc. to make progress.
According to the participants, BNP Paribas Fortis is also the only financial service provider that goes great lengths to support companies in the area of sustainable business, by analysing at which stage of the sustainable business path the companies are and by guiding them to use sustainability as an opportunity for their activities.
Do you want to participate in one of our Sustainable Business Workshops? Please contact your Relationship Manager for the practical details.
Not a client yet? And do you want to know more about the guidance we offer and the benefits of sustainability for your company? Discover what our Sustainable Business Competence Centre can do for you.