The Tremendous Opportunity Hiding in Plain Sight

There is a tremendous opportunity for community and regional banks to enhance the international payments, receipts and foreign exchange services they provide their commercial customers.

In 2021, the total amount of U.S. imports and exports totaled $6.5 trillion. In fact, 27.9% of U.S. gross domestic product was imports and exports. What other “new” product line has such an addressable market? According to the census, 76% of U.S.-based companies that import or export have less than 20 employees; 97% have less than 500 employees. These are businesses that community and regional banks are already servicing. But these institutions are hindered by the belief that they lack the size, sophistication and resources to confidently capture the opportunity.

The good news for banks is that there are technology solutions that can enhance their offering to customers that require international payments, receipts and foreign exchange services. These solutions provide more opportunities for sales and service on the bank end and help their business customers mitigate risks more effectively.

Quantifying this opportunity will vary for each institution, and location and asset size alone are not accurate predictors. Cross-border activity occurs across the U.S., not just in the most obvious international trade areas. Financial institutions should start by looking at their existing volumes to determine the opportunity. Within outbound and inbound payments, banks need to examine the number of transactions that took place, the total notional volume, the U.S. dollar and foreign currency split, what origination and destination countries are included and whether these are commercial or consumer payments. This initial analysis leaves out the potential for future growth through enhanced capabilities.

Many financial institutions are surprised to see that this is an opportunity hidden in plain sight. Frankly, it doesn’t take much activity — as little as $1 million a month of international payments going in foreign currency — to make this an interesting capability for executives to consider. That’s because banks can leverage technology to capture it more effectively.

Enhancing international payments capabilities doesn’t mean banks have to give up cultivating the experience that their customers expect. Controlling the customer experience here starts with offering the capability via multiple channels while retaining flexibility and control on pricing. This can lead to capturing more of the customer wallet, which provides additional insight into customer activity and, ultimately, a stronger and deeper relationship.

Community and regional banks that enhance their international capabilities can sell with more confidence, better retain existing business customers and potentially attract new ones in the face of others competing for the same business customers. They can even extend the product offering by offering risk management solutions.

Once a bank decides to take more control over the customer experience in international payments, the defining characteristic of success is how quickly it can produce revenue from these enhanced capabilities. It starts at the planning stages. The foundation of any transition is a detailed implementation checklist and, as importantly, a timeline that maps out the process.

All bank areas need to be in full support and aligned on the changes. You need both an executive sponsor and a product champion as part of this. Once implemented, institutions that properly incentivize their bankers should generate significant improvements versus the rest of the industry landscape. But it is critical for banks to engage an experienced and trusted partner to accompany them during this journey and guide implementation.

The opportunity for community and regional banks to enhance their international payments, receipts, and foreign exchange services they provide their commercial customers remains one hidden in plain sight. Leveraging technology to capture the value associated with both existing and prospective activity provides benefits to the bottom line and the customer experience. Don’t be surprised by the size of the opportunity, the activity with business customers, and the relative ease with which it can be captured and enhanced.