November 14, 2017 by Don Curren
Q: The task of the FXEM group is essentially getting money to people in very challenging environments. Can you tell me how the process works and what your team can do for clients facing that kind of scenario?
A: Normally, clients come to us and say to us they need to send money to different places around the world. We don’t have balances or the money readily available, but we have banks where we know are able to go and buy those currencies. That’s how we help the clients – not just getting the currency, but being able to deliver it. It very easy to sell the currency – it’s much harder to deliver.
Q: What are some of the challenges facing delivery in those kinds of environments? What can go wrong in the exotic-market scenarios?
A: Most of them – about 80% or 90% – are not straight-through payments. There are idiosyncrasies to these currencies. It’s not like transferring euros or yen. They have special regulations. In the case of Brazil, you need central bank approval.
Q: The first step is we sell the currency to the client up here, and then, once we’ve received the instructions on where the funds are going – the beneficiary – then we have to call the bank and the bank has to tell us if the beneficiary is ready to sign the order paperwork that has to be presented to the central bank.
A: So it’s not that you just sell the currency to the client and go buy it and let it go – there’s hand holding to do. In a lot of countries, it’s the same way – Argentina, Colombia, Taiwan, Korea – where the beneficiary has to come in and sign paperwork that has to be presented to the central bank.
Q: So the team is offering a depth of expertise and knowledge about these kinds of scenarios – and also networks.
A: The network is expanding all the time. I travel a lot to not only look for clients, but to expand the network of liquidity providers around the world. I’ve been in 140 different countries. Every year, I try to go to SIBOS. SIBOS is where most major banks from around the world meet each year.
I also go to African Development Bank and Asian Development Bank meetings around the world because you meet banks that will eventually provide you with liquidity in the countries. A lot of times it’s reactive. Somebody comes in and they need to buy Nigerian naira, I know where we can purchase it. We have the contacts.
Q: Can you tell me a little bit about the FXEM team – how many people are on it and what kind of experience and backgrounds do they have?
A: It’s 12 people. We have two contractors – or advisors, I call them – that have been in the market for 40-plus years, in the financial market. The head of operations was the head of operations at Societe Generale for major currencies and for emerging markets. Two of the people who are doing processing, one of them has been with me for 25 years and the other has 20 years. We have newer people helping the processing right now.
In the front office, the head trader has been with me for five years, but he’s been in emerging markets for over 20 years. We have two newer people that have less than five years experience.
Q: Is that part of the value that we can add for clients?
A: That’s how we differentiate ourselves from the competitor. The after service is much better – that’s what we’ve been told. They might have better pricing, but if there’s a problem because of the currencies…it’s much easier to deal with a shop like ours, because we have the people. We have our own operations. We’re not part of a larger organization’s operations.
Q: What’s your outlook going ahead? Do you see continued expansion of FXEM?
A: Cambridge has expanded exponentially. One of the reasons is due to compliance and regulation – banks are getting out of the business. They’re pushing more of the business to shops like ours or to major banks because the infrastructure to maintain compliance and regulation is way too expensive. Clients that banks were making half a million to a million dollars on are not enough to maintain them, so they’re pushing them out. If it’s a larger bank that can get a lot more fees or does a lot more things, they might be able to maintain it – or if not, a shop like ours is getting those kinds of clients.
Q: How do you see the Fleetcor acquisition affecting FXEM specifically?
A: It’s a win/win for us. Win/win because we were getting pushback from the larger clients because we only had two shareholders. Now it’s owned by a New York Stock Exchange traded company – it increases capital.
Q: Any particular geographic regions where you see expansion happening in that context?
A: The list of banks that Fleetcor deals with is huge. None of the members of the team has contacts with Japanese banks and we see some Japanese banks are part of the syndicate.
Q: How would you describe what you do and the value that you add to clients?
A: We get payments to where they should be going in an efficient, professional way. The important thing is that it’s legal. Our competitor tends to cut corners. I like to sleep at night. We have a reputation in the market that we go through the front door, not the side door.
Q: Anything else you think is important?
A: I think the experience that we have, the track record. We’ve all worked in major banks – it’s a professional team. The two advisors have a professional life, working at banks or law firms, over the last 40 years. That’s why we’ve been able to grow over a period of time.
About the Author:
Don specializes in developing, writing and editing content at Cambridge Global Payments across multiple platforms, including social media and our blog. He has reported on Canada’s financial markets and economy for the Wall Street Journal, Dow Jones and Reuters. Don also has extensive experience in corporate communications in both the public and private sectors.