Global expansion can provide a wealth of revenue opportunities for corporates. From tapping into new markets, to saving on transportation and shipping costs to attracting new investments, venturing into international markets can unlock business potential and is a key driver of growth. The evolution of digital avenues has also improved accessibility to global businesses and allowed customers to connect more easily.
However, navigating new currencies may seem challenging to some companies, especially those who have not previously ventured into foreign markets.
Nicolas Marquet, Head of Sales Europe at Kantox, spoke at VivaTech 2023 about how embracing global currencies can, in fact, boost competitiveness and profitability.
Embracing currencies
In the same way that conducting business conversations in a customer’s native language can give you a head start in negotiations, carrying out transactions in the local currency can also provide advantages to both sides.
❝ When working with international partners, speaking the local language and using the local currency will help to build seamless relationships. ❞
While some corporates may view currency as a potential hurdle to international business, Marquet highlights why this is not the case. “That would be the equivalent of seeing languages as a problem, when it’s quite the opposite,” he explains. “In fact, currencies, as well as languages, are a way to communicate and exchange with others. When working with international partners, speaking the local language and using the local currency will help to build seamless relationships.”
What are the benefits of embracing currencies?
Improve the online customer experience
E-commerce is a huge source of revenue and an essential pathway for global sales for many digital businesses, as well as traditional companies. Improving the online customer experience can significantly increase overseas transactions and lead to greater growth and revenue.
Using an online travel company as an example, Marquet explains how providing prices in the domestic currency can help to reduce cart abandonment, and therefore boost online sales. “Surveys show that 60-70% of people are likely to abandon an online purchase if they do not see the product’s price in their native currency,” he says. Research also shows that pricing in local currencies increases international conversion of sales by up to 40% (FastSpring).
Boost profit margins
Another key benefit of transacting in local currencies is the opportunity to boost profit margins. For example, selling in the currency of the customer allows companies to optimise FX markups. On the other hand, corporates can avoid FX markups when buying overseas. Buying in the currency of the supplier allows companies access to better deals, bypassing the seller’s FX markups.
In addition, corporates can boost profit margins by capturing FX gains. They can optimise exposure collection and capture FX gains when buying in currencies that trade at a forward discount, i.e. when the current domestic spot exchange rate is traded at a higher level than the current domestic future spot rate.
Enhance competitive position
Companies can also make use of pricing solutions to price more efficiently. This allows them to take advantage of interest rate differentials between currencies to price more competitively without affecting budgeted profit margins. It also reduces the variability of cash flows and allows businesses to provide more competitive prices, for as long as possible.
Automating currency management
While the benefits of embracing currencies are clear, Marquet explains how this can open companies up to foreign exchange risk. “When you buy or sell in a foreign currency, you are then exposed to that currency’s exchange rate. As we have seen in recent times, volatility can cause prices to fluctuate rapidly leading to potential losses or reduced profit margins”, he adds. This also means corporate treasurers must continuously monitor and calculate FX exposure on a daily basis – a time consuming, manual task.
Kantox offers a number of FX solutions to effectively mitigate FX risk while lowering the cost of managing currencies. By automating the entire FX workflow, corporate treasurers can free up their time to focus on more value-add tasks while improving liquidity management and optimising profits.
The recent announcement of the acquisition by BNP Paribas will enable the bank’s corporate clients to benefit from Kantox’s platform. Corporates can leverage Kantox’s offering to manage and automate their FX exposure, execute hedges directly, or use the bank’s single dealer platform, Cortex FX to make trades. The partnership will strengthen BNP Paribas’ offering and relevance to its corporate clients. Read more about the acquisition announcement here.
Who is Kantox?
Kantox is a global leader in currency management automation, helping businesses optimise their entire FX workflow while removing currency and operational risks. Kantox’s software solution has managed to successfully re-bundle the corporate FX workflow; offering a one-stop-shop, API driven, plug-and-play solution which has emerged as a unique technology within the B2B cross-border business sector. Kantox’s technology provides unrivalled levels of automation and sophistication to corporates in setting up hedging strategies. Find out more about Kantox’s offering.
Watch the video below to hear from Philippe Gelis, CEO at Kantox, about their currency management automation offering and the recent acquisition announcement.
In today’s environment, expanding businesses beyond home shores can unlock huge potential and adopting global currencies is a must in order to remain competitive. Find out more about how Kantox can support your FX management needs.
