Ebury's Jose Esteban discusses why CFOs must have the right banking partners and platforms to manage their cash worldwide and mitigate risks when expanding payment offerings into overlooked regions
As the world becomes increasingly interconnected, the payment industry is playing a pivotal role in simplifying cross-border transactions. Advances in technology and businesses mean consumers can now transact with greater speed and efficiency than ever before.
However, the rise of e-commerce has also created new challenges that require innovative solutions. Ebury CFO, Jose Esteban, explains that navigating the complexities of the payment industry is no small feat and staying ahead of the curve is critical to success.
Ebury, a global financial services firm that specialises in solutions to simplify international trade such as foreign exchange (FX) and mass payments, is increasingly moving into the e-commerce and fund management industries.
Esteban joined Ebury as CFO in 2020, after a successful tenure at Santander, and has spearheaded several acquisitions including Bexs Bank in Brazil. Santander has also invested £350 million at Ebury.
For Esteban, his experience with derivatives and fixed-income equities had prepared him for the role just in time for the peak in e-commerce that occurred during the pandemic.
“One of the main triggers of the globalisation of the payments industry is e-commerce,” says Esteban explaining that individuals and small companies that were previously isolated with limited access to products abroad found reprieve in e-commerce
“This created the opportunity for financial and payment institutions to develop the infrastructure needed to support the money flows associated with that activity. In particular, we are seeing this industry develop across Latin America, Africa and the Middle East,” he told The CFO.
In the following interview, Esteban explains how Ebury has navigated challenges presented by the globalisation of the payment industry and leveraged its unique position in the industry towards success, particularly in South America.
The globalisation of payments is important because of the increased pressures placed on treasury and cash management.
As companies expand their reach, faster payments become necessary. If the companies offering payment services are not prepared for this challenge, it may lead to those companies increasing the net working capital they need to carry on their day-to-day payment activities which can be expensive and inefficient.
Therefore, CFOs need to ensure that they have the right banking partners and platforms to manage their cash efficiently across the world and reduce their net working capital.
There are different layers of risk associated with expanding payments to new regions.
Companies operating in this space need to ensure that they have proper KYC [know-your-customer] processes in place to ensure they can operate with clients inside their own risk appetite. This particular risk can be mitigated with technology and strong local knowledge.
Those companies will also require strong and efficient transaction monitoring processes in order to ensure they are operating inside the parameters required by regulations, while avoiding inefficient processes which could delay payments unnecessarily.
It is key that the companies consider how to structure their internal processes and platforms in order to optimise their net working capital.
There is a reputational risk in the sense that payment failures could damage the standing of a companies in the payments industry. It is important that companies define their banking partners and infrastructures properly to mitigate that risk.
During the pandemic, a massive imbalance was created between supply and demand. There was a slowdown in several markets, and with it, a reduction in cross-border transactions.
We remained open for business however, despite the reduction in payment volumes. We continued to transact on behalf of our clients, and we continued to fight for new business.
At Ebury, we have internal controls which ensure we do not make payments to sanctioned nations or individuals, even if the purpose of the transaction is legitimate. During the pandemic, when businesses looked for new avenues for growth in new markets, these controls needed to be expanded. But you cannot always do this on your own – you need to rely on local partners and triple check the payment infrastructure to ensure you are being compliant with regulation.
For example, if I am we are conducting transactions in Spain, we know the banks there – we have a long-standing relationship with them and know how they operate and what the regulatory framework is. However, a transaction in a new market is different as we have not gathered the same knowledge; but that shouldn’t be a barrier to growth.
This region forms part of our strategy. Ebury has acquired a Brazilian company active in the payment business called BEXs – the acquisition is still subject to Brazilian regulatory approval and includes countries with strong demographics and strong GDPs such as Brazil and Mexico.
These countries also have a large number of companies that are active in e-commerce and international trade – these are natural clients for payment companies targeting that region.
In many different ways. For example, a Brazilian importer who would need to pay an invoice in US Dollars issued by a supplier abroad, Ebury can offer FX hedging and can facilitate the payment to the supplier. Also, for companies, like Spotify, which offer worldwide services and require payment from their subscribers in the local currency, Ebury can help them trade local currencies into any of their currency of preference and then facilitate the transfer of those funds that would be now in a single currency, into its account. In order for these platforms to pay their creators, they also need a company like Ebury to facilitate the process and ensure that the money is received.
