[This is a sponsored article with HSBC.]
SMEs represent 98.5% of the total of the 921,000 companies in the country. With SMEs in mind, HSBC Malaysia continues to facilitate local business creation, providing tools for pandemic recovery, growth and international expansion.
Despite projected difficulties in 2021, Malaysian businesses remain bullish about international trade, with 74% of local businesses planning to expand into Asia-Pacific within the next 3-5 years, according to HSBC’s Navigator Survey 2020. For businesses looking to expand internationally, one of the key aspects to consider is foreign exchange (FX).
The problems with traditional FX trading
FX is the process of buy and sell one currency for another currency on a foreign exchange market. Whether paying suppliers in another country or receiving sales proceeds from an international customer, every transaction will involve foreign exchange transactions.
Usually, for an SME to perform such a translation, it will have to call its dealer at the bank to ask for special rates, or go to a branch to complete the exchange transaction at the counter. Due to current Work from Home (WFH) arrangements, bank resources may be limited to assist you directly, which may delay your transactions.
Imagine if an SME paid different suppliers around the world in a single day, it would have to repeat the tedious process several times. There may even be a minimum value required for each foreign exchange transaction, which can restrict the flexibility SMEs need.
While there are other services that can enable FX transactions without going through the Telegraphic Transfer (TT) of non-bank institutions, it comes with the additional costs for the processing fee to transfer money from your bank to the service provider.
Bypass manual in-person processes
Instead of having to manage manual currency exchange processes, HSBC introduces Get Rate, a tool for SMEs to get a real time view on exchange rates without having to call a dealer.
As an HSBC customer, you will earn price transparency when you book the rate through Get Rate, as the bank margin will be prominently displayed on your bank statement.
With Get Rate, SMBs can transact immediately at the current special live rate. However, there is a 10-20 second window for final approval to lock in the rate to get the rate.
Book Forex Rates in Advance
As the foreign exchange market can be volatile, it is vital for SMEs to reduce their currency risks by currency hedging. One way to do this is to use HSBC Evolve, which gives them the ability to lock in exchange rates today for a future transaction.
HSBC Evolve is specially designed to guarantee companies have an overview and execute end-to-end foreign exchange transactions, including hedging. HSBC Evolve gives SMEs access to 460 currency pairs for sophisticated hedging requirements.
Example scenario: SH Trading, a local SME wants to pay its supplier in Europe for the spare parts necessary for its manufacturing activity.
Two key HSBC services can be used:
– Get the rate: SH Trading obtains the latest exchange rates online, ie 1 euro = 4.92 RM, and proceeds to the payment of its supplier by recording this rate during the execution of the transaction.
– Evolve: For its future payments to its supplier, SH Trading is worried about the possibility of a strengthening of the euro, so they proceed to lock in the current rate of 1 euro = 4.92 RM, but only execute the trade on the next month.
Even if the forex market next month changes to 1 Euro = 5.10 RM, the company will not be affected. Thus, they have succeeded in hedging any future currency risk by ensuring that its profit margin remains the same without being affected by currency volatility.
In the example scenarios above, SMEs gain convenience with Get Rate, because transactions can be done anywhere via laptop or mobile. While for SMEs with hedging needs, they can better control their currency exposure with Evolve as almost all major currencies are hedged.
As a value-added service, HSBC provides access to FX research and reports for SMEs for more information on the foreign exchange market.
Track 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 via Telegraphic Transfers (TT) are usually not accompanied by tracking tools.
Recipients are generally left in the dark and they I don’t know if the payment is made.
HSBCnet’s answer to this is the HSBCnet Track Payment feature, which enables SMEs to get real-time status of their collections, loans and payments via desktop or mobile devices.
The tool also informs you if you need to take action, if a transaction is rejected, pending, or requires additional documentation to process.
With HSBC, SMEs can enhance their digital banking experience by visualizing their company’s financial situation across different markets and currencies in one place via the Liquidity management dashboard.
The dashboard allows companies to see what has been transferred and when, with a transparent audit trail. Not only that, it also has a tool to help SMEs forecast cash flow for better working capital management.
If you would like to access any of the HSBC FX or payment solutions, you can submit a request form on this page.
- Learn more about HSBC Business Banking Solutions here.
- Read what we have written about HSBC in the past here.
Featured Image Credit: HSBC
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