Reducing Cross-Border Payment Costs with Swift GPI

Authors:
Jon Macapinlac, Director, International Banking
Kalli Heupel, Director, Foreign Exchange

Businesses engaging in international trade have historically been plagued by fluctuating exchange rates and hidden fees. Now, innovations in cross-border payments are changing the landscape.

Swift GPI is one of the newer capabilities, bringing unprecedented transparency across the international payment lifecycle. Consider it FedEx tracking for global payments, delivering clear insight into the payment journey, including fees and currency conversions.

Employing Swift GPI to Enhance Customer Global Trade

We recently employed Swift GPI to help a commercial client pinpoint issues in its global payment process.

Landscapes Unlimited is a Lincoln, Nebraska, business recognized for building some of the world’s best golf courses. To keep construction operations running on time, the company needs reliable access to products and services from international partners.

Recently, partners in Portugal and Mexico were seeing shortfalls in the contracted payment, so Landscapes Unlimited sought FNBO’s assistance to better understand the issue. With the enhanced transparency afforded by Swift GPI, we were able to do an in-depth review of the flow of funds and identify the reasons for the payment shortfalls.

When Landscapes Unlimited sent funds to its European vendors, currency was converted through a beneficiary bank at a less advantageous rate. This same bank also assessed a $20 fee. Then, an additional charge of 18.20 Euros was added to the transaction by the vendor’s bank.

A similar situation was occurring with the company’s payments to a supplier in Mexico. Payments were being made in U.S. dollars bi-weekly, and these payments were each being assessed $50 or more of intermediary bank fees, plus being converted at a very high exchange rate.

Payments were being made in U.S. dollars to one beneficiary every two weeks, and the intermediary bank was taking approximately $52 worth of fees, plus converting the funds at a very high exchange rate.

During our analysis, we also discovered the following:

• USD wires to vendors in Portugal were being converted to Euros by an intermediary bank, which was not working to negotiate a beneficial spread and limited transparency.
• Some of the company’s wires to Mexico were converted to MXN at a varying rate of exchange, ranging anywhere from 6 to 9% off of current market rates, which appears to be outside a typical commercial banking relationship spread. This range is more commonly found in retail currency exchanges, where rates are fixed for longer periods and have wider margins due to smaller transaction amounts and the flexibility to accept or decline exchange rates.

Based on these detailed insights, it didn’t take long for FNBO’s team to devise a solution that would reduce the cost and improve the reliability of international payments for Landscapes Unlimited.

Streamlining International Payments Efficiency and Reducing Costs

Since Landscapes Unlimited was sending funds in U.S. dollars, it was at the mercy of beneficiary banks when it came to assessing exchange rates. These banks had no client relationship with the company, so there was no incentive to help ensure the best rate was employed. Transferring funds in U.S. dollars was also costing the company through a variety of fees.

To reduce these costs and to promote a more favorable rate of exchange, our team proposed that Landscapes Unlimited convert the funds to foreign currency through FNBO prior to sending the payment. This strategy would allow FNBO to find the best rate of exchange for the client prior to initiating the transaction, while also avoiding additional fees. By taking this approach, Landscapes Unlimited could also be assured that the correct payment amount was received by the vendor.

Overall, FNBO was able to save Landscapes Unlimited about $20,000 in intermediary bank fees and FX conversion fees over the last six months. In addition, funds are transferred faster with Swift GPI, with 100% of funds settled within 24 hours, some in as little as 30 minutes.

These simple improvements to the payments process helped bolster relationships with the company’s vendors, ensuring that Landscapes Unlimited has the materials it needs to provide quality outcomes for its customers at more competitive prices.

Learn how the FNBO Global Banking team can help your company succeed in the global marketplace.

About the Authors

Jon works with external partners to discover and deliver the best global banking and risk mitigation solutions to our clients. Jon enjoys building business relationships and ensuring that his customers have the knowledge and services they need to succeed.

Kalli assists corporate and financial institution customers with foreign exchange transactions, international treasury solutions, FX risk management, and cross-border payment digitalization strategies.