FX forward payment contracts explained (+ 4 best providers)

With FX forward payment contracts, you can protect your business from exchange rate downside while still potentially benefiting from the upside if rates improve.

We get it, though. The idea of ‘contracts’ might sound intimidating if you're not a seasoned FX pro. Maybe you've heard they're complex or only for bigger corporations with dedicated treasury teams.

The truth is, deliverable forward payments are a relatively straightforward way to protect your business from foreign currency market changes. For growing small to medium-sized businesses (SMBs) working across borders, having access to these contracts is more than a nice-to-have — especially as your payment volumes start to climb above €100,000 annually.

Think of forward payments as a protective failsafe for your international payments. If exchange rates fall drastically, you're protected. And you're not gambling or speculating — you're just making sure exchange rate swings don't eat away at your hard-earned profits.

In this guide, we'll cover the basics of forward payment contracts, the different types available and when you may want to use them. By the end, you'll see why thousands of business leaders use forward payments to sleep better knowing their margins are protected no matter what the currency markets might do tomorrow. 

What is a forward payment contract? 

A forward payment contract is an agreement between you and your bank or cross-border payment provider that lets you lock in today's exchange rate for a future transaction as a way to minimise currency risk. 

There are two main types of forward payment contracts: deliverable and non-deliverable. At iBanFirst, we offer deliverable forward payment contracts, which means actual currency is exchanged when the contract matures. This guide focuses on deliverable forward payment contracts as well. 

So how does it work in practice? 

You want to make a payment in the future instead of ‘on the spot’. You agree with a provider like iBanFirst to lock in a specific exchange rate for a set date or timeframe down the road. Depending on the type of contract you choose, you commit to exchanging up to a certain amount on that future date (or within a specific window). 

And when that date or window arrives, you exchange at the agreed rate regardless of how the market rates have changed.

The most common types of forward  payment contracts

Of course, not all forward payment contracts are the same. Think of them like different tools in your financial toolkit — each designed for specific scenarios. 

Let's break down the three main types. 

1. Fixed forward payment contracts

A fixed forward payment contract is an agreement that allows you to lock in an exchange rate for a specific future date, with settlement occurring exactly on that date for the full amount.

It's the classic, no-frills forward payment contract that provides straightforward protection for your business.

You lock in today's exchange rate for a specific future date. When that date arrives, you exchange the full amount — no more, no less. No earlier, no later.

Given the simplicity, you generally get the most favourable rate compared to the other types of forward payments, along with complete certainty about your future exchange costs.  

When a fixed forward payment contract may be best 

Fixed forward payment contracts work best when you have precise payment timing and amounts, as they offer the most straightforward protection against currency fluctuations.

Here’s when you might choose to use a fixed forward payment contract:

• You want cost efficiency: Fixed forward payments typically offer a slightly better exchange rate than flexible or dynamic forward payments because they come with less complexity. The provider knows exactly when and how much currency you'll exchange.
• You have precise payment deadlines: If you know exactly when and how much you need to pay, a fixed forward payment is wonderfully simple. You lock in your rate, mark the date in your calendar, and that's it. 
• Your payment schedule is set in stone: Some business transactions come with non-negotiable payment dates — like buying goods with a fixed delivery and payment schedule. Fixed forward payments are tailor-made for these situations. 

For instance, if your business needs to pay $100,000 on 30th June for some new equipment, a fixed forward payment provides exactly what you need — nothing more, nothing less. 

2. Flexible forward payment contracts

A flexible forward payment contract lets you lock in an exchange rate and then draw down portions of the currency at that rate over a set period, offering timing flexibility while maintaining rate certainty.

Flexible forward payments solve the timing challenges that SMBs often face since they allow you to:

• Lock in today's exchange rate (like a fixed contract) 

• Draw down any portion of your currency at any time within a set window 

• Use the same guaranteed rate for multiple payments 

This means you don't need to know the exact amount or exact payment date like you would with a fixed forward payment contract.

Flexible forward payment contracts typically offer a slightly different rate than fixed forward payments to reflect the added flexibility they provide. This trade-off can be well worth it for businesses with uncertain payment schedules and multiple payments to make. 

When a flexible forward payment contract may be best

Flexible forward payment contracts are ideal when you need to make multiple payments over time or when your payment schedule isn't fully defined, giving you timing flexibility while maintaining rate protection.

Here’s when you might choose to use a flexible forward payment contract:

• You need payment timing flexibility: If you have multiple payments spread over time or uncertain payment dates, a flexible forward payment lets you use the rate when needed. You can draw down portions of your currency as required, rather than all at once. 
• You want one guaranteed rate for multiple transactions: With a flexible forward payment, you get the security of a single guaranteed exchange rate across all your payments during the contract period. This makes budgeting and pricing decisions much easier. 
• You're making ongoing supplier payments: If you regularly buy from overseas suppliers but don't know exactly when each invoice will arrive, flexible forward payments give you the consistency of one exchange rate while adapting to your actual payment schedule.

For example, say your business imports various components from Asia throughout the year. You know you'll need roughly $350,000 to $450,000 worth of goods, but exact order amounts and timings will vary. With a flexible forward payment contract, you can lock in today's EUR/USD rate, then draw down against it as needed to make payments over the next several months — all at the same guaranteed rate.  

3. Dynamic forward payment contracts  

A dynamic forward payment contract is an agreement that secures a minimum future exchange rate (protection rate) while offering the opportunity to benefit from favourable market movements at settlement.

This means you can lock in a protection rate to secure your margins, but if the market moves in your favour by settlement day, you can still take advantage of the better rate.

Different dynamic forward payment types exist to match specific business situations: 

• Full participation: This dynamic forward payment guarantees a fixed protection rate but allows full access to a better market rate at maturity if available. 

• Partial participation: Secures a protection rate for part of the amount, while the rest can be exchanged at a better rate if the market improves. 

• Capped participation: Lets you benefit from a better rate but only up to a pre-set limit (the cap), providing a balance between security and opportunity. 

• Activating participation: Allows you to benefit from a better rate up to a specific threshold. If the market moves beyond this threshold, you revert to the protection rate. 

• Capped activating participation: Similar to activating participation, but if the threshold is exceeded, you get a pre-determined participation rate instead of reverting to the protection rate.

Rather than one being "better" than another, each type fits different business scenarios. 

For example, full participation dynamic forward payments could work well when you expect moderate market improvements and want maximum potential benefit. A capped participation dynamic forward payment might be better when you need a guaranteed minimum but want some upside within certain boundaries. 

Given the additional features, dynamic forward payments generally have different rate structures than the other forward payment types as well. Depending on the provider and the type of dynamic forward payment you use, there may be extra set-up fees or slightly less favourable protection rates compared to fixed or flexible forward payments. 

When a dynamic forward payment contract may be best

Dynamic forward payment contracts are suited for situations where you want both protection against negative currency movements and the opportunity to benefit from favourable market shifts.

Here’s when you might choose to use a dynamic forward payment contract:

• You want protection with possible upside: Dynamic forward payments secure a minimum protection rate while allowing you to take advantage of favourable market movements before settlement. This balance can be appealing when market sentiment is mixed. 

• Your market outlook is moderately positive: If your analysis suggests currency rates might move in your favour, but you're not confident enough to leave it unprotected, dynamic forward payments offer that middle ground. 

• You're comfortable with a more sophisticated approach: If you're comfortable managing a more complex contract, dynamic forward payments might be the best solution for you. 

As an example, imagine your business needs to pay a $120,000 invoice in 12 months. The amount and payment date are already set. You believe the euro might strengthen against the dollar during that time, but you can't afford the risk of it weakening either. A dynamic forward payment would let you lock in a protection rate as a safety net, while still allowing you to benefit if the euro does strengthen as you expect it to. 

Why international SMBs use forward payment contracts 

If you're running a business that sends and receives money across borders, currency risk isn't just a theoretical concern — it's a very real threat to your bottom line.

Here are five primary reasons many growing international SMBs use deliverable forward payment contracts:

1. Protect profit margins from exchange rate fluctuations 

The truth is, currency markets move constantly — sometimes dramatically — based on everything from economic changes to geopolitical events. And there are plenty of common currency risk management mistakes businesses make along the way. Without protection, each of these movements could potentially eat into your profits. 

Forward payment contracts can help you protect your margins from these unpredictable swings, allowing you to: 

• Confidently deal with your overseas suppliers and partners knowing what your foreign currency costs will be 

• Make accurate financial projections without having to predict every single "what-if" scenario 

• Focus on running your business instead of watching exchange rate movements 

2.  Predictable cash flow for budgeting and planning

How much will that USD invoice cost you in euros next month? Will it fit within your budget?  

With forward payment contracts, you know exactly how much local currency you'll need for each foreign payment, weeks or even months in advance. This predictability is huge for:

• Creating accurate cash flow forecasts 

• Planning capital expenditures with confidence 

• Ensuring you have sufficient funds available when payments are due 

• Making strategic decisions based on known costs, not educated guesses 

3. Potentially benefit from favourable market movements

"But what if exchange rates move in my favour? Won't I miss out if I lock in a rate today?" 

If you're bullish on a currency pair moving in your favour by the time a payment is due, you may choose just to wait it out and make a spot payment later. If you're right, great — you nailed it. But if you're wrong, you're at the mercy of the markets with no downside protection, meaning that payment is costing you more than it needed to. 

With forward payments, you still get to benefit when you're right without being completely exposed to negative movements. This is where dynamic forward payments shine brightest. They provide downside protection while still giving you access to better rates if the market moves in your favour. 

4. Match your approach to your actual payment patterns  

Not every international business has the same payment schedule. Some have fixed quarterly payments. Others make frequent or irregular transfers across multiple currencies. It might be that you pay up front or upon delivery of goods. Different forward payment contracts can adapt to your business operations and unique payment patterns. 

The ability to tailor your currency risk management to your actual business needs is incredibly valuable when working across multiple currencies. 

5. Focus on your core business, not currency markets 

Another frequently overlooked benefit of forward payment contracts is that they can help to free up mental bandwidth. For business leaders and CFOs, this is a rare commodity! 

With spot conversions, you can only make a payment on the same day or one or two days in advance. So, you may spend a fair bit of time monitoring rate changes or questioning whether you made the right decision by converting your funds right away. And this constant second-guessing can be exhausting.

Forward payment contracts let you make smart decisions up front, then get back to what you do best — running your business. The peace of mind that comes from knowing your currency costs are fixed and predictable is worth its weight in gold. Or euros. Or dollars. You get the idea...

4 best FX forward payment contract providers for international businesses 

We've covered why forward payment contracts matter. Now you need to choose the provider that actually best fits your business. For each provider in this section, we'll break down what they offer, what sets them apart, and any compromises you might need to make.

1. iBanFirst

First up, iBanFirst. Founded in 2016, iBanFirst is a cross-border payment provider built specifically for growing SMBs. Combining a simple yet powerful platform with support from our in-house FX experts, iBanFirst is transforming the cross-border payment experience for small and medium-sized enterprises.

What do you get with iBanFirst?

• All iBanFirst customers have access to all three types of deliverable forward payment contracts mentioned above — fixed, flexible, and dynamic.
• With an iBanFirst multi-currency account, you can hold, send and receive funds in 25+ currencies.
• The iBanFirst platform is purpose-built for small and medium-sized businesses with significant international payment needs.
• You and your beneficiaries can track your payments across borders — just like a parcel — with time-stamped updates at every step.
• Our dedicated account managers are FX experts who know your business. They can help you build custom FX strategies and make use of our fixed, flexible and dynamic forward payment contracts to protect your business against currency fluctuations.
• iBanFirst offers a host of integrations, so you can connect it to your existing stack, thus eliminating fragmented systems and unlocking automation across your financial processes. You can also use the iBanFirst API to integrate iBanFirst with third-party tools in your tech stack.

What are the trade-offs?

• iBanFirst is less suited to businesses with low international transfer volumes.
• We don't offer debit cards like some of the other providers listed.
  
  

2. Ebury

Ebury is a specialised financial services provider focusing on foreign exchange services, international payments and trade finance for SMEs and mid-sized corporations with significant cross-border operations. It takes a more tailored, relationship-driven approach to helping businesses manage international risks and expand globally.

What do you get with Ebury?  

• Ebury offers fixed, flexible and dynamic forward payment contracts, as well as other currency risk management tools.
• It supports payments in 130+ currencies across global markets with local details available in 29 of them.
• It also provides trade finance solutions, including invoice financing. 
• It offers mass payment capabilities for handling multiple international transactions. 
• You can connect eBury with your ERP systems.
  
  

What are the trade-offs?

• The complex, tailored pricing structure makes it harder for businesses to predict costs or compare Ebury to other providers.
• Ebury’s platform isn’t very user friendly, which also makes it harder to integrate into a modern tech stack.

3. Convera

Convera is a rebranded and refocused branch of Western Union Business Solutions with an extensive global network capable of processing significant volumes of transactions. Convera’s platform offers a broad range of services designed to meet the needs of larger businesses managing international payments and FX.  

What do you get with Convera?

• Convera's FX risk management tools include fixed and flexible forward payment contracts.
• Convera has an extensive global reach, with payments in 130+ currencies across 200+ countries.
• The platform can handle high-volume payments and mass payouts to vendors and other beneficiaries.
• Dedicated FX risk specialists work closely with businesses to design customised FX strategies based on each company’s unique exposure to currency risks.
• You can connect Covera to your ERP systems and use the API for other integrations.
  
  

What are the trade-offs?

• Convera does not appear to offer dynamic forward payment contracts that offer upside participation when rates move in your favour.
• Convera’s platform is less user-friendly compared to more modern alternatives and the limited payment tracking is less than ideal. 
• Its higher fees aren’t the best for SMB payment volumes. 
• Similar to Ebury, the custom pricing and fees make it difficult to compare Convera with other providers.
  
  

4. Revolut

Revolut has established itself as a mobile-first financial solution for both personal and business users. They've expanded beyond multi-currency accounts to include payment processing, expense management tools, debit cards, and various integrations, positioning themselves as a comprehensive solution for freelancers and enterprise-level businesses.

What do you get with Revolut?

• Revolut offers fixed and flexible forward payment contracts to help users manage currency risk.
• Revolut supports 25+ currencies and offers local account details in GBP, USD and EUR. For all other currency accounts, you use SWIFT account details for international transfers.
• It offers a broader range of features than some others on this list, including tools for team spending and expense management.
• You can use physical and virtual cards with spend controls for team members, expense categorisation, and real-time notifications.
• Revolut also integrates with accounting, expense management and HR tools.
  
  

What are the trade-offs?

• Revolut does not offer dynamic forward payment contracts.
• Revolut’s aim of appealing to all business sizes — from freelancers to enterprise businesses — comes at the expense of SMB-specific solutions.
• Its pricing structure means key features are locked behind more expensive plans and weekend exchanges can come with additional markups.
• Revolut’s more personalised support only comes at the 'Enterprise' tier, leaving SMBs to face the complexities of FX alone.
  
  

Get started with forward payment contracts today  

Every day, many growing businesses like yours watch their hard-earned profits slip away because of unexpected exchange rate movements. What should be a relatively simple international payment suddenly becomes a cash flow nightmare.

But it doesn't have to be this way.

With iBanFirst, you can use fixed, flexible or dynamic forward payments and take control of your international payments. No more guessing games or nasty surprises. Just predictable costs and protected margins.

And when you're ready to set up a forward payment contract, you won't be left to figure it out on your own either. You'll work directly with an iBanFirst FX specialist who'll help you determine the best approach for your specific business needs, like:

• Which forward payment contract type matches your payment needs

• How to structure your contracts for maximum protection 

• When to use dynamic forward payments for potential upside 

• How to build a practical FX strategy that works for your business 

Plus, getting started with iBanFirst takes just minutes, not days.

Ready to protect your profits from currency market swings? Request an account today and join thousands of business owners and finance leaders who sleep better at night knowing their margins are secure.