Mark Frey, group president of Corpay Cross-Border Solutions, explains the fintech advantage in powering global payments while limiting FX exposure.
Global Finance: Why form strategic relationships with technology partners?
Mark Frey: We have several technology partners across our business, some of which are service providers for our infrastructure needs, and some that directly support our commercial organization and how we attract and create value for clients. In both categories, we see it as mission critical to have true transparency and alignment in what we aim to achieve and how that partner contributes to value creation. Suppose the partner is aligned in how we define our immediate and longer-term goals; that takes us to how we can generate mutual value in terms of the commercial aspects of our relationship. Ideally, we build models with partners where they benefit from our success, and the more value we can derive from their capability in the marketplace, the more we can generate economics they can share in. Our view is that technology and commercial partnerships work best when we are completely aligned in terms of what we’re trying to achieve and how we’ll share in the value generated.
GF: How are fintechs helping small and midsize enterprises manage foreign exchange risks?
Frey: The fintech sector has successfully improved access to financial products and services by leveraging client-centric technologies. In the B2B space, there are a significant number of customer segments that have experienced a material improvement in access to financial services, especially risk-management services, because fintechs have taken capability down-market to small businesses and consumers in addition to building sector-specific solutions for particular industry verticals that have previously had difficulty either accessing or customizing solutions for their specific use cases. Fintechs have been successful in this democratization by leveraging technology and sector-specific applications that customize generic financial services and products to the needs of an industrial sector or segment of customers. Fintechs, by definition, can be more targeted in their go-to-market strategies than the big banks, and often pick particular segments of the economy in which they can develop a competitive advantage. In building and deploying innovative technologies in this targeted way, fintechs like us have made it economically viable to service specific segments with tailored product offerings that big banks, which appeal to a broad-based audience, simply can’t do at scale.
GF: How have you created a seamless FX trading solution?
Frey: When we think of FX trading and risk management, we focus on organizations that move money across borders at scale, in terms of absolute currency volume and the number of payments. Our focus then is to help deliver risk-management pretrade planning, budgeting and strategy tools that can ultimately be executed and turned into payments to vendors or accessed in terms of incoming accounts receivable solutions. By focusing on both the FX risk-management strategy and how those FX risks can be broken down into the payments at a line-item level, we have been able to create value for our clients by allowing them to streamline their planning and budgeting process while also ensuring operational efficiency in terms of actually moving or receiving FX currency. We provide tools and analysis that help clients manage their currency risk while assisting them to move money across borders at scale with precision and efficiency. We’ve focused our technology on the intersection of these two areas—leveraging technology to provide insights and reporting that leads to more timely and effective risk-management decisions, with a platform that automates processes regarding the movement of funds.
GF: What are your predictions for cross-border payments and currency risks in 2024?
Frey: Regarding the big macro picture, we expect that currency markets will be more volatile in the future than they have been in the past. Whether from escalating geopolitical tensions, diverging interest-rate expectations per currency or a historically strong USD, we expect volatility to rebound from a somewhat subdued period. The world will also get smaller and businesses will continue to look beyond their borders for expansion opportunities, thereby driving cross-border payment and FX trading volumes higher in the years ahead. In short, we see more risk and additional volatility but a world where businesses chasing growth aim to generate it from international rather than local markets. With this worldview in mind, we’ve developed solutions and think we’re well positioned to win.