What is Forex Transaction Processing?
Forex Transaction Processing (FTP) is a concept devised by RouteForex to bring Treasury front office services to corporate and HNI clients in India. The service helps corporate limit transaction costs in the forex markets by brining transparency at affordable cost.
What are the benefits of Forex Transaction Processing?
FTP has many benefits -
a) It helps corporate freeze their financial trasaction costs while dealing in foreign exchange markets;
b) It helps corporates engage with forex professionals to keep an eye on their transactions and
c) Reduce the cost of operating their own treasury set-up by outsourcing it to a third party.
How do we ascertain the benefits our company will accrue from this service?
The Relationship Managers at RouteForex engages with finance teams to do a short audit on the previous transactions to ascertain the current costs. This current cost forms the basis of the benefits this company will accrue in future.
Do we need to change our bank to avail this services?
We don't advocate client's to change their banks. We believe bank is a partner in their businenss in different form and shape. Currently, we service 60 clients Pan India who bank with 25 banks. We have been able to convince clients and banks to process forex transactions once client manadate is shared with the bank and us. Mandate is a letter of authority in favour of Dealers at RouteForex to cover transactions on behalf of clients.
We know there are differences in the exchange rates quoted by the bank. We have tried to persuade the bank many times but they don’t listen to us. Why would they listen to you?
That is good news for you. We are happy to note that you have taken congnisance of the fact that bank has charged you over and above what was agreed. The dealers at RouteForex have been successfully convincing banks on the prevailing inter-bank, Cash/Tom rates. Though in some cases it may take us 2-3 transaction to bring the bank at par to our costs and requirements. Dealers at RouteForex need a supportive and understading client to quickly normalize the operations.
Do you have a RBI approval to undertake this business?
We are a corporate entity which is not governed by Reserve Bank of India (RBI). Nevertheless, RBI guidelines doesn’t restrict any third party intervention in forex dealings. They only want the transaction (cash flow) to be routed through a Authorized Dealer (AD). We have been successfullly concluding transactions for 290 companies since May 2014.
In case we outsource this activity to RouteForex, will it affect our relationship with the bank?
We are extremely sensitive of the fact that Client relationship with the bank is prime. At all times we ensure that all our interactions with the bank are professional, cordial and smooth.We have ensured all interactions with the banks are done on a recorded line to safeguard interests of our clients and dealers. We have zero-tolerance for non-compliance on this front.
What is a dealing room? How is RouteForex dealing room different from that of a bank?
A dealing room is a place where financial transactions are undertaken on real-time. The room is equipped with all systems to assist dealers to undertake transactions in a secure and timely manner. When we say secure, it means, all transactions are audio and video recorded.
How securely transactions are handled by RouteForex dealers?
The dealing room has a restricted entry and only dealers appointed by RouteForex can enter that premises. The systems are secured and encrypted to protect client information. Further, we don’t seek ask for information which is privy to clients and their businesses. Only information sought is Amount, Currency, Nature of Transaction (Export/Import), Type of Transaction (Cash/Tom/Spot/Forward) and the bank.
Can RouteForex time the market during the day to capture day's high/low for our transactions?
Yes we provide the service of timing the market for a good rate for client transactions. Our dealers are required to cover the transaction as and when a request is received from clients. Yes, we can surely watch for any particular levels which is client wants to transact at. Once those levels are traded in the market dealers at RouteForex will inform the client.
What if my bank doesn't allow us to outsource this service?
It is not in the interest of the bank to allow Corporates to outsource this service. It has a direct bearing on their profitability. A large portion of any banks profitability comes from Treasury operations. The important point to note here is why do they discourage intermediaries? They do have intermediaries for loans, liabilities, retail loans like Home, Personal, Vehicle etc. The simple and obvious answer is this intermediary is working to save client cost. Had RouteForex approached the bank the other way round we would have received a warm welcome.
We would like to avail free trial service to ascertain the benefits? What is the policy on Free Trial?
RouteForex acknowledge the fact that this is a new concept and most of the prospective clients are hearing about it for the first time. To demostrate the benefits we provide One Free Trial to clients.
What is the documentation required to avail this service?
The documentation is very basic and easy. We have a service agreement letter to be signed by the client and us which has all the Do's and Don't's of this service.
What is a bank margin? How does bank ascertain bank margin for a particular client?
Bank Margin is the commission which the bank charges over inter-bank rates. In most of the sanction, it is not mentioned by the bank. The treasury decides on case to case basis. The bank does an analysis of the relationship to arrive at the margin to be charged from a particular client.
Can RouteForex negotiate a better bank margin fixed by the bank?
No, we don't undertake task to negotiate bank margin with banks on behalf of clients. We provid basic advisory on the range of bank margin basis the turnover and industry.
Does RBI has any control over these rates?
No, RBI doesn’t have any control over the rates quoted by banks. The rates in forex markets are quoted Over-the-counter (OTC) and volatility is very high. Also, the marketable lot in the inter-bank market is $250k below which banks covers their position by aggregating. Clients needs to put in place systems to watch the volatility and real-time rates to control cost leakages.
How transparent is FTP services from RouteForex?
All client orders and subsequent cover with banks are taken over recorded lines. The deal confirmation comes with the exact time of the transaction covered with the bank. A client can request for the voice recordings for some of the transactions randomly to keep a check. The IT team at RouteForex is working on providing complete information on the transaction on our website through a User ID and Password for each client.
What if disruptions are caused by bank to let RouteForex book rates with them on behalf of clients?
The bank covers transactions with people mentioned in the Board Resolution (BR for Companies) and Letter of Authority (Sole Proprietor/Partnership Firms). It is the prerogative of client to assign this responsibility on the person. Most SME Corporates doesnt have the know-how of the forex market operations. In case, they decide to hire treasury professional, the costs are too high. Thus, RouteForex provides a cost-effective outsourcing model.
Does RouteForex have any references of clients availing these services?
The references are shared subject to client permission. At all times, we keep client transactions private and confidential. A prospective client can ask the Relationship Manager at RouteForex to provide industry/location based references. Additionally, we keep updating Client Testimonial section of our website to share opinions and feedbacks.
We have got a screen provided by bank which flashes online rates. What is the value proposition in such cases for clients?
Yes, technology is the answer for the future. Many MNC and Private sector banks are offering transaction portals and Live screens to their clients to improve efficiency and reduce costs. While we conduct trial transactions for clients having Online rates from banks, we have shown them the difference in the rates. The back-end of all such screens is administered by banks and is prone to tweaking. We have 4 such clients who have shifted from Screen based transaction portals to manual coverage by RouteForex dealers.
What can cause a time delay in covering transactions with the bank and how does it affect clients?
RouteForex has created additional capacity in the dealing room to conclude transactions in a timely mannner. As soon as we receive a transaction, dealers contact the bank officials for rate covering. It usually takes not more than 3 minutes to cover a particular transactions. Yes we admit that while on boarding a new client, it takes 2-3 transactions to smoothen the operations. It is important to bring bank officials in the know how of the change of operations.
How does RouteForex manage their relationship with the banks with whom they cover client transactions?
RouteForex works for its clients. Our relationship with the bank is Limited to the extent of covering transactions. We keep an eye on all client transactions to limit any leakages in rate offered by banks.
Why should clients trust RouteForex with their transactions?
FTP is a revolutionary service which can reduce costs upto 2% on each transactions. We have shown maximum difference of Rs.2.50 per Dollar on rates offered by banks. This difference increases in case of forward contracts and cross-currency transactions. We are working hard to service 500 clients by March 2018 covering transactions worth USD 4 billion for our clients.
What all client segments does RouteForex service?
RouteForex covers the entire spectrum of corporate clients in India. Our smallest client is a 8 cr forging exporter in Faridabad . On the other extreme, we cover transactions for clients with annual forex volumes of USD 150 mn. Our sales discussions are on with clients with over USD 1 billion wallet size.
