How To Ramp Up Foreign Exchange Offering

It’s the morning of an international trip – you check in to your flight on your phone, request an Uber to the airport, and download three movies. Upon landing in the foreign country, time is updated automatically, and an app allows you to communicate in the native language, peruse the city’s transit system, and make a reservation for dinner. But first, you’ll need local currency, so you stand in line at a kiosk and wait to be handed colorful pieces of paper.

A few years ago, this was the confounding reality when cross-border payments and exchanges were still notoriously fragmented despite significant improvements to almost every other payment system.  But things have changed. Fintech and digital transformation have had a huge impact on the foreign exchange (forex) market, and the adoption of new technologies has created greater efficiencies, driven further innovation, and created huge market opportunities.

New Money

The global digital payments market, valued at USD 17.88 billion in 2021, is primed to grow at a compound annual growth rate (CAGR) of 15.0% by 2030. This growth is expected largely as e-commerce expands globally and because the proliferation of mobile devices has pushed more consumers to adopt digital payments. But large, traditional institutions (like banks and credit card companies) are historically slow to innovate in-house, which has opened the door for smaller, more agile tech start-ups to fill the void, as evidenced by Visa’s nearly $1 billion acquisitionOpens a new window last year of cross-border payments platform, CurrencyCloud.

The retail customer has been left out of the picture with all the enterprise innovations. This is where there’s a significant opportunity for multi-currency digital wallets that allow consumers to store, trade, and spend different currencies seamlessly. (Or, as Nerdwallet refers to itOpens a new window , “an international checking account with multiple subaccounts, each with a different currency.”) And just as advances in smartphones made us more comfortable with mobile banking, the recent proliferation of cryptocurrency is causing people to rethink the global money movement.  

As multi-currency digital wallets continue their inevitable adoption, here are some ways this innovation can benefit businesses and consumers alike:

1. Speed, Convenience, and Cost 

The need to use third-party providers for foreign exchange and international transactions has been time-consuming and costly, with frequently fluctuating rates and expensive fees. Bank wires can have steep charges and exchange rate markups, and delivery isn’t as fast as domestic wires. Multi-currency digital wallets enable you to exchange currency and keep it in reserve in a single wallet instead of executing a currency exchange at each purchase and transaction point. 

For businesses, HSBC was the first major US bankOpens a new window to launch its own multi-currency digital wallet to its commercial customers last year, fully integrating the bank’s global payments network with the bank’s existing business banking platform and enabling customers to “pay like a local.” The bank touted that the feature would “enable payments to be delivered to a beneficiary’s account usually within minutes of being sent.”

 See More: Why Fintech Needs to Brace Against Scammers as Fraud Levels Spike

2. Functionality

While there are definite advantages of multi-currency digital wallets for those making frequent international trips or purchases, the technology has a wide range of practical uses. The target market is anyone who wants to hold multiple currencies and exchange them seamlessly within a single wallet. While travelers are an easy example, a large number of people live near international borders and may wish to execute small transactions in a local currency on a regular basis. (And holding onto that local currency is also a good idea, especially if you think it might appreciate.) 

The key is expanded functionality, which can either be built into an existing bank app or developed as a standalone wallet that connects to device payment systems (Apple Pay or Android Pay) or any external transaction providers (Venmo, etc.). Other next-gen features allow the ability to transfer funds from one currency account to another (or to third-party accounts) and see an overview of all accounts with the sum of each displayed in US dollars – making the movement of money transparent and easy to track.

3. Futureproofing Payments

In our hectic, fast-paced lives with multiple purchases per day, it’s easy to take for granted the options and convenience we enjoy with our domestic payment methods. But we can sometimes lose sight of the challenges presented by the interconnectedness of our global economy. For small businesses with international clients, the ability to offer customers the option to pay in their native currencies is a big business advantage.

Looking to the future, post-pandemic office work has become much more remote, and anyone who has recently handled payroll can attest to the myriad challenges this presents. Multi-currency accounts/wallets can significantly help companies manage constant exchange rate fluctuations as they pay their employees worldwide.

As we become more complicated and connected as a society, an increasing number of banking customers and consumers will seek a single digital wallet that allows them to hold and spend different currencies seamlessly.  This is just one step in reducing friction in how consumers spend money. Today it’s about navigating multiple fiat currencies, but in the future, it may involve a single cryptocurrency used regardless of geographic location. Financial services organizations that can launch multi-currency wallets quickly, decisively, and globally will be well positioned to capture a significant segment of our burgeoning international marketplace.

Do you think foreign exchange needs an upgrade? And why? Share with us on FacebookOpens a new window , TwitterOpens a new window , and LinkedInOpens a new window . We’d love to hear all about it!

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