As more businesses enter the global marketplace, they must function effectively in many different countries, each with its own unique environment of regulations, perceptions, culture and even currency.
Those conditions mandate a company protect itself against threats which may be effectively regulated here but which are very real in other countries where it is active.
AFEX is a global payment and risk-management solutions provider with a focus on cross-border transactions that serves more than 25,000 companies worldwide.
Its payment and foreign exchange services fit a company’s specific needs. The AFEX Direct online payment platform provides a snapshot of a company’s foreign currency exposure and helps companies manage international invoices.
AFEX General Manager for the Americas Christian Spaltenstein said AFEX has a diverse focus which includes business to business transactions, international payments and foreign exchange.
Thanks to the growth of Internet-related industries, cryptocurrencies, and even each country’s unique operating environment, AFEX has never operated in a more challenging environment, Mr. Spaltenstein admitted.
But those factors also combine to produce unparalleled opportunity, ones which new technologies are helping to capitalize on.
Because of these new technologies, even small retailers can access the global marketplace, Mr. Spaltenstein said.
“Take a small jeweler in Alabama. They have a limited market. Now, thanks to the Internet, they have a global reach.”
And it is not just the Internet, Mr. Spaltenstein said. The popularity of the mobile phone, and technologies such as mobile wallets it has spawned, allow that jeweler access to a truly global marketplace which includes the un- and underbanked. And it brings previously unheard of opportunities to people in remote parts of the world.
“A few years ago, the non banked in Africa could not participate in global trade because they did not have a bank account,” Mr. Spaltenstein said. “Now many Nigerians, for example, have no bank account but they do have a mobile wallet in their cellphone.”
The Internet leads a set of factors which have made it easier for startups to get to market, including many in the fin-tech space, Mr. Spaltenstein said. They are taking over the space and performing many tasks previously done by banks, especially those targeting consumers and small and medium businesses.
But these companies are leaner and much more efficient. And they cover a wide range of services including lending, factoring, trade financing and additional services.
“The same thing is happening in international payments and foreign exchange,” he added. “Service is becoming democratized. Everyone has access to specialists, lenders and mobile wallets.”
While technology brings more services to more people in less time, it also enables more thorough responses to threats such as fraud without compromising service quality, Mr. Spaltenstein explained.
“Entire industries such as biometrics have arisen which have created systems to protect customers.”
Many protection systems employ intelligent, learning algorithms. Their quality improves with the amount of information they absorb, Mr. Spaltenstein explained.
Even “Know Your Customer” requirements improve with technology.
“Years ago ‘Know Your Customer’ was nothing more than checking boxes. Now they are sophisticated systems raising alarms and providing conclusions,” Mr. Spaltenstein explained.
For most companies, the biggest challenge is at home in the form of internal fraud. As they grow, the number of responsibilities to manage can overwhelm management, which may assume the greatest risks are external ones. That is not always the case, Mr. Spaltenstein said. AFEX helps companies employ safeguards against both internal and external fraud.
Companies of all sizes, including that jeweler from Alabama, need to prepare for the costs of participating in a global marketplace, Mr. Spaltenstein said.
When making and receiving payments and converting currencies, companies inadvertently add to their costs and hurt their competitiveness by not employing the most efficient processes. Any unneeded steps add costs as each intermediary takes their own cut. If your competition has a leaner system the added costs associated with unnecessary steps in yours leave you vulnerable through higher prices.
AFEX takes three key steps when working with a client, Mr. Spaltenstein said. They help companies process payments, select the best hedging tool, and advise them on what will happen in the global currency market.
Mr. Spaltenstein used the example of a European wine importer who wants to know how much wine he can sell within a set budget. If the proper hedging tool is employed, the wine importer can buy more wine at the same price.
The importer may hedge one-third of the cost several months before delivery by entering into a forward contract to lock in a specific rate. That specific currency’s movement vis-à-vis the US dollar is monitored, and the importer may purchase another portion before delivery depending on the market. The remainder would be purchased near the delivery date.
Mr. Spaltenstein admits he was torn when the Fed raised rates. Much of the world is struggling. European quantitative easing is still in effect and problems in China have manifested in less real estate investment in popular American cities.
The industry is poised for an exciting 2016, Mr. Sapltenstein believes. Service quality will be high for customers willing to integrate an API into their system, a process that keeps getting easier. Small companies will work together to create exciting solutions and bigger ones will do the same.