Guaranteed FX, part of our FX suite, helps protect both the buyer and the seller from the risk of fluctuating exchange rates during the payment journey.
The improvements in cross-border payment infrastructure have opened up the opportunity for marketplaces and platforms to access new markets and connect local buyers and sellers globally. However, this engagement at the global scale also involves managing cross-border transactions across various currencies.
Different business models generate unique payment flows, each presenting their specific set of challenges. Online marketplaces and platforms connect a variety of sellers to consumers, requiring a payment system that can manage multi-party transactions.
Introducing cross-border payments adds an extra level of complexity due to currency conversion. In some cases, marketplaces and platforms need to deal with manual currency conversions. In other instances, they don’t have the means to prevent any conversion risks or losses due to fluctuations.
Mangopay offers a solution to these challenges by providing flexible options that enable marketplaces to:
- tailor FX according to specific needs
- effectively mitigate the impact of FX volatility
- manage currency conversions
- optimize cross-border costs.
Marketplaces can choose between two options - Spot FX and Guaranteed FX - to best fit their own FX strategy.
The FX benefits
With real-time FX insights, you gain immediate access to the latest currency exchange rates, allowing for timely and strategic decision-making. With more control, you can monitor and customize your currency conversions to suit your specific needs.
Competitive rates are at the heart of Mangopay's offering, giving you a cost-efficient edge that can generate revenue. Furthermore, transparency is a key benefit, with access to mid-market rates that shed light on market dynamics, thus enabling well-informed financial strategies.
At the cornerstone of these services lies flexibility, which stands out as a vital feature for handling FX. Whether you need to book rates with immediate settlement or prefer the stability of locking in rates for future transactions, we adapt to your business model and needs. The ability to change or cancel arrangements with no obligation to fulfill quotes ensures that you can react to market shifts without being locked into unfavorable conditions, securing your financial interests.
Understanding the options: Spot FX and Guaranteed FX
We offer two distinct FX management services: Spot FX and Guaranteed FX. Spot FX lets you access live exchange rates for quick currency conversions, well-suited for real-time payments. On the other hand, Guaranteed FX locks in rates for a short period, reducing the risks associated with exchange rate volatility.
Below find a comparison between these two options.
For situations that require a specified amount, Guaranteed FX serves as the optimal solution. If a US-based buyer wants to buy goods from a European supplier, they have to pay in euros. Say the exchange rate is 1 USD for 0.93 euros. With Guaranteed FX, the platform can lock in this exchange rate for the buyer, so they see exactly 0.93 euros for every dollar they spend, for a certain period. This allows the buyer to know the exact cost in euros for their purchase without worrying about rate changes.
Key benefits of Guaranteed FX
Guaranteed FX provides stability in exchange rates, flexibility in transactions, transparency for all parties involved, and a method to safeguard potential revenue from currency fluctuations.
Risk mitigation through fixed rates
The biggest benefit of using Guaranteed FX is knowing the exchange rate won't change for your lock-in period. This protects your business from any unexpected ups and downs in the currency market.
Flexibility in fulfillment
There's no obligation to complete a transaction at the quoted rate. If you decide not to go ahead with the conversion, you can simply cancel the transaction.
Precision and transparency in multi-party transactions
Your customers know exactly how much they will pay at checkout. Imagine a customer in the UK shopping on an online marketplace that lists prices in USD. As they move from looking at items to paying for them, the prices could fluctuate because of changing currency values. This confusion could lead to the customer deciding not to buy anything at all.
Guaranteed FX steps in to solve this problem. It lets the marketplace allow the buyer to benefit from a stable exchange rate for a set time. This way, the price the UK customer sees at the start is the same price they'll pay at the end. In all cases, sellers are assured of receiving the exact amount they expect in their currency when an item is sold, while the platform enables sellers to reach new buyers who are not limited to the seller’s currency.
Potential revenue impact
For a marketplace making cross-border transactions, the exchange rates can change between the time of the transaction and when they convert their revenue back to their home currency.
For example, consider a global marketplace based in the UK. When conducting a cross-border transaction with a customer in the EU, Guaranteed FX can help manage potential exchange rate changes and their impact on revenue, as depicted in the image below.
The bottom line: tailored FX management
For those who want to avoid surprises from sudden rate changes, Guaranteed FX makes sure the rate decided on today stays the same when it's time to pay, helping with accurate budget planning. Guaranteed FX allows rate locking for a set duration, ensuring stability in pricing prior to transaction confirmation, which is particularly useful in multi-currency pricing and treasury management. Overall, FX offers global marketplaces and platforms precise transaction amounts, revenue protection against market volatility, and a layer of certainty and control.
By offering two types of FX services embedded in a modular infrastructure - SpotFX and Guaranteed FX - marketplaces and platforms can pick the service that best fits their needs from these flexible choices.
To find out more about how Mangopay can help you select and connect the products you need to succeed, get in touch with us.
