For 50% of financial directors, the erosion of margins represents one of the challenges for 2019 (Gartner), while for 73% of them, the priority is to ensure their treasury forecasts for this year are reliable (PWC). In the tourism industry, where companies are exposed to foreign exchange risk, these statistics underline the importance of cross-border payments. But then, which partner to choose: a bank or a fintech?
Your activity as a tour operator requires numerous international payments to pay your destination management companies in their local currency. As a financial director, accountant or treasurer, this responsibility lies with you. These operations involve numerous accounting entries and expose your company to the risks of the foreign exchange market.
International payments and EBICS
You no doubt use the European banking protocol EBICS (Electronic Banking Internet Communication Standard) to send your bank collection or payment orders in the main banking formats (SWIFT, XML, CFONB (French banking sector standardisation committee), etc.) and to validate them electronically. Your company has ERP (Enterprise Resource Planning, also known as an integrated management software package) or a TMS (Treasury Management System) for your treasury management, both compatible with this European standard. For operational reasons, the choice of a payment service provider should not jeopardise your internal processes or your management tools.
In a highly competitive market, it is up to you to protect your margins by making your foreign currency payments at the best price and anticipating the unforeseeable, by putting in place foreign exchange coverage solutions. Your company can then offer fixed catalogue prices to its travel agency customers. Lastly, in order to ensure loyalty from your local destination management companies, you must not forget about the speed and quality of the execution of payments. But do the services of your bank meet these requirements?
With fintechs, the end of the status quo
Your company may have several foreign currency accounts, for which your bank charges account maintenance fees. They also offer you coverage products such as forward exchange or flexible forward exchange[1] or flexible forward exchange[2] contracts, but at uncompetitive rates, since the exchange rates they apply are out of line with the market. The same goes for spot exchange payments[3] via the banks. Opaque rates, uncertainty with regard to the date of execution of the operation and less traceability of your funds.
Unlike a multinational, which has access to the trading room of their bank and to exchange rates in real time, your company does not enjoy the same quality of service.
However, since the European payment directives PSD1 in 2009 and PSD2 in 2018, fintechs have offered an alternative; yet the ones which, like iBanFirst, offer solutions which include the EBICS protocol and can be integrated into your existing systems, are few and far between.
No need to choose between your ERP and quality financial services
The new account addition or payment initiation services offered by fintechs are based mainly on automatic data extraction (web scraping) or on APIs (application programming interfaces), established by PSD2. At iBanFirst, we do not believe that APIs will replace EBICS in the short-term. The banks and publishers of ERPs or TMSs compatible with EBICS have no real interest in replacing solutions which work and with which people are happy. For this reason, our platform offers these two connection types, API and EBICS.
The iBanFirst solution therefore allows you to retain your ERP and lets you have accounts in multiple currencies, without account maintenance fees; as well as spot exchange payments and forward and flexible forward exchanges at highly competitive tariffs, thanks to real-time rates closer to the inter-bank rate and therefore more favourable. All of these services are accessible online via our secure platform.
Apart from its spots and forwards offers at very attractive rates, iBanFirst also offers you the chance to take advantage of uncertainty through dynamic forward exchange contracts (with total, partial or capped participation). These neutralise foreign exchange risk like a forward or flexible forward contract while also, under certain conditions defined as a whole, letting you benefit from favourable movement on the foreign exchange market. You can thus protect your trade margin while remaining opportunist.
“Technological and financial innovation for the benefit of all companies”
“As the financial director of a French tour operator for 10 years, I had followed with interest the new features introduced by European directives PSD1 and 2, and in particular the emergence of fintechs. I wanted to optimise my foreign currency payments, not just reduce the cost, but also improve the quality of execution of the operations and the traceability of the funds. It was hard to ignore the fact that, unlike our bank, specialist payment institutions were offering a real-time exchange rate, charged no foreign exchange commission and had fixed transaction fees which were lower than those of the banks. The iBanFirst solution is a genuine management chart for all my foreign currency payments, and although it first caught my attention for its attractive tariffs, its ergonomics and its perfect integration into my ERP, it is the personalised support which I really appreciate. Thanks to Léa, my iBanFirst account manager specialising in tourism, I was able to use my budgeted rate to define a more suitable foreign exchange coverage solution, put in place and handled in just a few clicks. iBanFirst really does make technological and financial innovation available to all companies!”
If you too would like to optimise your foreign currency operations, our specialist tourism account manager will be delighted to give you more details.
[1] The forward exchange contract allows a company to set the exchange rate for a collection or an invoice. It can thus be protected against a rise in the purchased currency, and secure their trade margin.
[2] The flexible forward exchange contract constitutes a currency reserve which can be used over a period of up to 24 months. It is particularly suited to the payment of invoices in foreign currencies for which the exact amounts and/or due dates are not known.
[3] A spot exchange operation, so called because it is settled on the spot, or within a period of 2 working days. It is the most commonly offered foreign exchange operation.
