[This is a sponsored article with HSBC.]
SMEs are made up 98.5% of the total of 921,000 companies in the country. Taking into account SMEs, HSBC Malaysia continues to facilitate local businesses, providing tools for pandemic recovery, growth and international expansion.
Despite the projected difficulties in 2021, Malaysian companies remain positive in terms of international trade, with 74% of local companies forecasting to expand into Asia-Pacific in the next 3 to 5 years, according to HSBC 2020 browser survey. For companies that want to expand internationally, one of the key aspects to consider is the exchange rate (FX).
Problems related to traditional currency exchange transactions
FX is the process of buy and sell one currency for another currency in a forex market. Whether it is to pay suppliers from another country or to receive sales revenue from an international customer, each transaction will involve foreign exchange transactions.
Normally, for an SME to perform this translation, they will need to call their bank dealer to request special rates or go to the branch to run the FX transaction at the counter. Due to the current work-from-home (WFH) arrangements, banks may have limited resources to help you directly and this may delay your transactions.
Imagine if an SME paid different vendors around the world in one day, they would have to repeat the tedious process several times. There may even be a minimum value required for each currency exchange transaction, which may restrict the flexibility needed for SMEs.
While there are other services that can allow cash transactions without going through telegraphic transfer (TT) from non-banking institutions, it includes additional expenses to manage commissions to transfer money from your bank to your service provider.
Ignoring face-to-face manual processes
Instead of having to deal with manual processes of effective effects, HSBC presents Get the rate, a tool for SMEs to get one real time view at exchange rates without the hassle of calling a dealer.
As an HSBC customer, you will win price transparency when you book the rate using Get Rate, as the bank margin will be prominently displayed on your bank statement.
Through Get Rate, SMEs can make transactions immediately at the current special live rate. However, there is a 10 to 20 second window for final approval to block the rate to get rate.
Book Forex rates in advance
Because the foreign exchange market can be volatile, it is vital for SMEs reduce your risks of change by currency hedging. One way to do this is through HSBC Evolve, which gives them the ability to block exchange rates today for a future transaction.
HSBC Evolve is specifically designed to guarantee this companies have a complete vision and execute end-to-end currency exchange transactions, including hedges. HSBC Evolve provides SMEs with access to 460 currency pairs for sophisticated hedging requirements.
Example of scenario: SH Trading, a local SME wants to pay its supplier in Europe the spare parts needed for its manufacturing business.
There are two key HSBC services that can be used:
– Get a rate: SH Trading gets the latest online forex rates, which is 1 euro = 4.92 RM, and pays its provider by booking this rate when it executes the transaction.
– Evolve: For its future payments to its supplier, SH Trading is concerned about the possibility of strengthening the euro, so they proceed to block the current rate of 1 euro = 4.92 RM, but will only execute the transaction next month .
Even if the foreign exchange market next month changes to 1 euro = 5.10 RM, the company will not be affected. Therefore, they have successfully hedged any future currency risk by ensuring that their profit margin remains the same without being affected by currency volatility.
In the above example scenarios, SMEs win comfort with Get Rate as transactions can be done anywhere using a laptop or mobile. While for SMEs with hedging needs, they may have more control over their exposure to foreign exchange with Evolve, as almost all major currencies are hedged.
As a value-added service, HSBC provides access to Research and reports on effects on SMEs for more information on the foreign exchange market.
Keep track of payments and get a complete view of your financial situation
When making international or domestic payments, the ability to track transactions is essential. However, transactions made by telegraphic transfer (TT) usually do not include tracking tools.
Beneficiaries usually stay in the dark and they i don’t know if the payment is made.
HSBCnet’s answer to this is the HSBCnet pay-per-track feature, where SMEs can get real-time status of their collections, credits, and payments through desktops or mobile devices.
The tool also tells you if you need to take some action, if a transaction is declined, pending, or if additional documentation needs to be processed.
Through HSBC, SMEs can elevate their experience in digital banking by visualizing the financial position of their business in different markets and currencies in one place through Liquidity control panel.
The dashboard allows companies to see what was transferred and when, with a transparent audit trail. Not only that, but it also has a tool to help SMEs predict cash flow for better fund management.
If you are interested in gaining access to any of the HSBC payment or currency exchange solutions, you can submit a consultation form page.
- Learn more about HSBC Business Banking Solutions here.
- Read what we’ve written about HSBC in the past here.
Featured Image Credit: HSBC