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Rich Banks Poor Clients : High Time for India to Innovate in Forex services
Anand Tandon
August, 2017


Companies in India enjoyed the initial phase of economic liberalisation. Favourable policies, lower input costs including labour helped Indian exporters' clock profitability in excess of 20% for almost two decades.

Their concentration was completely on exploring newer markets, buying better machines to cater to the growing complex demands of high-end consumers', Information Technology, engineering projects etc. The speed of globalisation, abundant data and advent of technology helped buyer's and seller's alike to understand margins and input costs holistically in each others' market making it easier for them to bargain better. This resulted in higher volumes amid lower profit margins. During the era of global economy crash down (between 2007 to 2014), Indian businessman was closely introduced to the idea of cutting costs. But it is always difficult to find various adjustable cost-centres in businesses.

Forex is one such area where money vanishes in air without writing a cheque. A simple mark-up of 20 paisa on export process of $400,000 makes you poorer by Rs.80, 000 without separately debiting your bank account.

As far as banking is concerned, forex transaction was never an issue for the Indian businessman who enjoyed good business margins and happily paid higher spreads on interests. In reality the companies were quite sensitive to the interest rates they were paying. Due to lack of clear understanding and in absence of right platforms to track and evaluate their forex exchange, they were clueless about their hard earned money which went off into air in forex transactions.

Generating Income

The state run banks had it easy till couple of new-age private sector banks started offering better products to consumers in international business bringing in efficiency though at a higher hidden cost. Till date clients in international trade business are banker's first choice to acquire, as it allows them to cater to a more polished segment of business community generating high fee income.

I am a firm believer in a statement made by a senior banker once in an internal meeting, 'bankers are much smarter than clients' think they are'. The intricacies of any product are best understood by the designer. The volatility in forex market started going up from 2007 onwards from 4-5% to 7-9% making life difficult for exporters and importers. Both ran for shelter in quick succession and banks had a great time ripping both apart dearly. And clients still continue to pay obnoxious forex spreads on decent size transactions losing a few hundred thousand rupees every month. The better informed clients referred to online rates which were often delayed by more than 15 minutes and bankers would never listen to these clients despite intense bargaining.

Myforexeye Intervention

We introduced Myforexeye in 2014 to address this pertinent issue which eroded Rs. 60, 000 crore of profits from clients' account directly, enriching bank and its shareholders.  Myforexeye interacted with 5000 clients in its 3 years journey. We found that almost 90% of these clients had visibly large forex spreads many times breaking day high/low bands.

During our initial two years of operations we marketed the idea of Transaction Process Outsourcing (TPO) to 5000+ clients. We successfully convinced more than 500 clients across the country to outsource forex rate booking process to a team of seasoned dealers at Myforexeye. And today we stand taller after having processed 50,000+ forex transactions worth USD 2.1 billion from 50+ banks.

The industry potential is huge with 1 million Small & Medium Enterprises and 20 million individual customers using banking services to transact in foreign exchange market.  Better profit margins of clients from both B2B and B2C segment is under risk due to information arbitrage by banks, lack of transparency and reliable platforms.

Overcharged Forex Spreads

There are cases where the business community in international trade realised the losses due to over charged forex spreads but the voices were never raised so as to continue good relationships with favourite banks. When Myforexeye approached few companies the acceptability for the idea was low even because of the fear factor of informing company management on the losses incurred in past due to overcharged rates.  We were surprised to get the insights from a large VC firm which lost almost Rs 5 crore in 3 remittances for its investment in India routed through a foreign bank.

Aimed solely at increasing profitability of a business, we curated services which have never been experienced or exercised in the Indian market. The services are quite affordable when compared to bank charges. It achieves cost optimization by offering various other services required by Indian exporters & importers alike. We have recently launched our Mobile App that will allow paid users to be in total control of their forex transaction costs, assisted/processed by Myforexeye dealers. This application can disrupt Rs.60, 000 crore profitability of banks. The user will get to know the exact time of execution of each deal, time & rate charts, voice recording of their transactions within 5 minutes from MFE dealing room. The service is available for corporates/HNI and shall subsequently be offered in coming months to individuals remitting forex.

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