Shared technology resources such as application programming interfaces (APIs) may have a new audience as companies adapt to the rapid market shifts following the Brexit vote.
"The API is an automatic plug in. If a company needs to do something to improve their currency outlook or to hedge, they can get in and get out and be quick about it," said Jeremy Cook, chief economist and head of currency strategy at World First, a London-based company that offers money transfer and foreign exchange services among its products.
"There is a need for greater speed in converting FX hedges or cross-currency payments," said Brad Bailey, a research director at Celent. "That is something that is especially true for companies outside of the largest institutions."
Responding to currency movements quickly, or changing foreign exchange or payments strategy for automated payments, enables trades or transactions to be executed faster. An API allows these updates to be made fast and with minimal IT work, Cook said.
"That goes hand in hand with the volatility," Cook said, adding World First is bringing new functions online almost weekly to manage parts of the cross-border processing chain, ranging from client capture, compliance, straight through processing, and other tasks designed to bypass third parties and "bring everything under one roof."
"Cross-border transactions is an old industry. It's not something that popped up out of nowhere like Uber," Cook said. "The changes we're seeing are allowing for the democratization of the markets away from correspondent banks."
"In FX markets today, the search of [best execution] is quite intense and complex," said Javier Paz, a senior analyst at Aite Group. "Asset managers have to prove to asset owners much like corporate treasurers to their CFO that an FX transaction was structured and executed as efficiently as possible."
An API could be better for clients, Paz said, cautioning there are also potential drawbacks.
"An order delivered via API has speed advantages over manually entering a trade and taking a few minutes in the process, but 'better/faster execution' does not necessarily translate to 'best execution,'" Paz said.
This article was written by John Adams from PaymentsSource and was legally licensed through the NewsCred publisher network.
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