Corporate banking franchises face a number of obstacles to their potential profitability. smartTrade technologyUnique multi-asset e-commerce solutions aim to address these barriers, enabling customers to maximize profitability while delivering the highest standard of technology.
of smartTrade FX, FX options, fixed income, crypto and money market solutions are used by banks, brokers, asset managers and corporations. These customers now demand more sophisticated solutions to help them minimize their risks, streamline and simplify their operations, and grow their own and their clients’ businesses.
Ludovic Blanquet, product director at smartTrade, highlights the impact of industry competition on corporate banking franchise banks. Bank clients no longer cooperate with just one bank, but through multiple distribution channels. As a result of this change, banks had to redesign their services and offer pricing on multiple channels, such as single-seller portals and multi-bank portals. and mobile applications.
“SmartTrade has identified the challenges that come with multiple distribution channels,” explains Blanquet, “and we are investing heavily in this space to ensure user journeys tailored to each type of client, be it corporate, multinational, small or medium-sized businesses. (SMEs), high net worth or retail.” Flexibility and the ability to adjust workflows on the fly, he adds, are key requirements for smartTrade customers.
Attracting and retaining clients
Dynamic margin management has become central to attracting and retaining clients. However, many banks are not yet equipped with the sales management tools necessary to attract and retain clients – tools that help deliver dynamic returns and attractive pricing. “Many banks have multi-product relationships with their clients,” explains Blanquet, “which they have to take into account when trading FX for those clients. Margins have been under pressure for many years FX they see some banks as loss leaders, while the margins they get from other financial products tend to be much higher. They therefore need a margin system that consumes data from other parts of the bank to account for the various margins they receive from different financial products. smartTrade invests in the development of a sophisticated, dynamic margin system that is suitable for business to manipulate and adjust in real time.”
Corporate banking franchise banks often choose between two main approaches to risk and growth. Both provide franchises with liquidity to keep margins a focal point while maintaining FX streams that reach trading boards. Banks with a medium-sized corporate banking franchise can use it FX as a loss leader as they earn margins from their trade finance and lending businesses. They will operate with minimal risk depending on the geography. Larger banks with broader and more diverse corporate banking franchises, on the other hand, are able to take more risks and can therefore operate these franchises as true profit centers. smartTrade’s LiquidityFX provides extensive options for banks, whether they prefer concurrency or price distortion.
John Stead, global head of pre-sales at smartTrade, explains how banks can struggle to understand their clients and match their orders to the right execution sources, orders and hedging algorithms, potentially challenging franchise profitability. “Every client’s flows are unique in terms of their reasons for trading style, toxicity, pair and size,” he says. “When securing client flows, you have to consider whether it’s good, neutral, or bad for my relationship with my liquidity partner. Do you have the tools to distinguish one from the other? If you don’t even know the risks, you can damage your liquidity partnership and ultimately the profitability of your business.”
Barriers to profitability
One of the key barriers to the profitability of a corporate banking franchise can be the use of an intermediary, a multi-bank platform (MBP), to obtain liquidity from the bank. MBPs charge a significant fee for the service of connecting buyers and sellers, and for some banks this fee can be one of the biggest costs of doing business, impacting the revenue of FX. According to Stead, this does not give banks or corporations a fair deal. “These hidden costs for banks are huge, making some corporate deals almost unprofitable,” he says. “Although the costs appear low to businesses, they are actually hidden. Some banking costs will inevitably fall to businesses. Conflicts of interest they face MBPMaking money from each trade means they favor or support high-income sources, and some liquidity providers may not be available if they are perceived as competitors.”
Ludovic Blanquet notes that banks are getting smarter about their concentration FX flows across all activities (retail, SMEswealth, corporations, loans, import/export finance and cross-border payments). Because of this, he expects new workflows and services to emerge, such as automatic cash flow forecasting for corporations, lower payment fees for monthly recurring cross-border payments and structuring FX part of import/export financing.
“SmartTrade follows all these market developments,” he says. “We work with our customers to develop the tools needed to meet the evolving needs of their clients.”
John Stead would like to point out that smartTrade is a signatory FX Global Code – Common sense guidelines and practices for sellers, banks and all market participants to follow as they grow their business. smartTrade is committed to two key principles of the Code: to follow its spirit and letter, and to provide technology and solutions that enable clients to do the same. To this end, smartTrade procedures and processes are specifically designed to minimize counterparty risks. “That should be good for business overall,” says Stead, “which is a win-win.”
About smartTrade Technologies
smartTrade Technologies, a pioneer in multi-asset electronic trading solutions, offers innovative technology that allows you to focus on your trading and growing your business while quickly adapting to changing market demands.
smartTrade provides an agile end-to-end trading solution supporting foreign exchange, fixed income, equities, derivatives (including options)cryptocurrencies and money markets. Our solutions offer connectivity to over 130 liquidity providers, aggregation, intelligent order routing, order management, pricing, distribution, risk management and fully customizable HTML5 the user interface.
smartTrade works with a range of clients from banks, brokers and asset managers to corporate firms. LiquidityFX for foreign exchange and smartFI for fixed income are provided as a fully managed and hosted service located in all major global markets.
smartAnalytics, our multi-asset big data analytics solution, allows you to create historical or real-time dashboards and reports to interact more effectively with markets and end customers.