How To Choose The Right Corporate FX Platform For Your Business

For businesses operating on a global scale, the risks posed by currency fluctuations are a constant concern. These fluctuations can dramatically impact profits, cash flows, and overall financial stability. 

For example, a manufacturing company that sources raw materials from overseas suppliers might see its costs skyrocket due to an unfavourable exchange rate, eroding profit margins. Similarly, a technology firm that generates a significant portion of its revenue from international markets could experience a decline in earnings if the local currencies weaken against the company's functional currency.

Selecting the right foreign exchange (FX) platform is essential to manage these risks effectively and streamline international transactions. If you don’t pick the best FX platform, it can lead to significant losses, operational inefficiencies and delays, and compliance headaches.

Understanding your business needs

To find the perfect FX platform, you need to first understand your business needs. You can do this by thinking about several key areas, such as:

1. Business goals

Identifying your primary goals - whether that’s cost savings, risk management, or payment efficiency - will guide you in finding the best FX platform for your business. Consider exactly what you need: hedging tools? Cross-border payment functionalities? Integration? Comprehensive reporting? Rank these features in order of importance to your operations.

2. Transaction volume and scalability 

What’s the volume of transactions you conduct across different currencies and regions? Knowing this will help you work out the scalability you need from your FX platform. Are you dealing with a high volume of transactions? Or is your FX exposure more limited? Consider how your transaction volume may change in the future as your business grows.

3. Future growth potential 

Don’t overlook future growth – it’s another crucial factor in finding the FX solution that best suits your business. Ensure the platform you choose can adapt and scale as your business expands into new markets and regions. And make sure it can integrate with your current financial systems and workflows – this is key to making it work seamlessly. 

4. Support and service quality

The level of customer support you receive from your FX solution, including availability and expertise, can make a significant difference, especially when dealing with complex FX needs. It’s also important to do some research into the platform’s reputation within the industry to ensure you’re getting something reliable and trustworthy. You might find yourself facing costly downtime and frustration with poor support.

5. Security and customisation

With security so paramount in finance, you should only consider platforms that offer robust protection of your data and transactions. And if you have specific FX requirements, you’ll want a platform that can be customised. 

Different types of FX platforms explained

Once you’ve considered your business’s needs, you can then explore the various types of FX platforms available. The corporate FX platform landscape is diverse, offering a range of options to suit different business needs. These include:

• Traditional bank platforms

While reliable, traditional bank platforms often come with high fees and limited functionalities. They may be suitable if your business has straightforward FX requirements and you prefer the idea of working with an established institution.

• Non-bank fintech solutions

In contrast, non-bank fintech solutions provide specialised features with competitive pricing, making them a popular choice for cost-conscious businesses. These platforms often offer innovative tools and technologies, but they may lack the track record and resources of traditional banks.

• Peer-to-peer marketplaces 

By connecting businesses directly for currency exchange, peer-to-peer marketplaces enhance transparency and offer more control over rates. However, these platforms might have limited liquidity and support compared to other options.

• Broker and multi-bank platforms 

Broker platforms provide access to interbank markets, although services and pricing can vary widely so make sure you compare offerings. Multi-bank platforms, which aggregate liquidity from multiple banks, offer improved pricing and execution. These platforms might be best if your business has high trading volumes and a need for competitive rates.

• Specialised trading and payment platforms 

If you’re a frequent trader, specialised trading platforms come equipped with advanced tools and analytics to support your strategies. Payment platforms focus primarily on cross-border payments and integrate FX solutions to streamline transactions. These platforms cater to specific business needs but tend to lack the breadth of services offered by more comprehensive solutions.

• Hybrid and cloud-based platforms 

Combining features from various platform types, hybrid platforms offer comprehensive services. Cloud-based platforms, meanwhile, offer flexibility, scalability and easy access from anywhere. These platforms might be best if you have diverse FX requirements and a need for remote access.

Choosing the best FX platform for your business depends on your specific needs and the nature of your operations. Each type has its strengths and weaknesses, so it’s crucial to evaluate them against your goals and strategy.