Why every Fintech should be monetizing their International USD volumes
What's up, y'all! Happy Thanksgiving! I hope everyone is feeling the love this week. With the Thanksgiving holiday just around the corner, our team at Routefusion is working tirelessly to finalize the release of a groundbreaking product we've been keeping under lock and key for the past year. The product is temporarily called International USD Swap. If you have any better names please let us know! It was created by engineers, if you couldn't tell 😂.
Last year, we were processing roughly $400 million a year in international USD. International USD, for those unfamiliar with the term, is when a person or business sends USD to a USD account in another country. It's extremely typical for businesses to move USD from the US to a US account in Europe or the UK, where they then do their own currency conversion.
For people in the FX space, we don't really like international USD wires because we can only make a small fee per transaction. So, being the nerdy FX devs that we are, we began devising a plan: How could we monetize that $400 million a year in international USD?
If you haven't heard of the new hotness in global payments, let me introduce you to Swift GPI. Swift GPI, in a nutshell, gives senders more visibility into where the funds are in the Swift network. If you don't know what Swift is, then you can read about it here. One of the really cool features of GPI is that you can ping a beneficiary bank account and find out what currency it is in! Mind-blowing!
Sooo, we ran some numbers and, shockingly enough, we discovered that over 40% of our international USD wires were going to an account that was not USD!
This means that when the funds arrived at that account, the receiving bank was doing a currency conversion at a spread of 3-5% and then depositing the converted amount into their account. Highway robbery is another term for what was happening..
Armed with this knowledge, we worked with our compliance teams and our partner network to cut the receiving bank out of the FX conversion process.
As a result, if the receiving bank account is not USD, instead of that bank converting the funds into local currency at a 5% spread, we can now convert them at a much more respectable FX spread.
After a year of testing this, we decided to open it up to other neobanks, expense management platforms, or fintechs that have international USD volumes and would like to begin monetizing it
Linkedin: https://www.linkedin.com/in/coltonseal/
Email: my_name@routefusion.com