By integrating its cash management operations with online foreign exchange, Deutsche Bank says it can win a bigger share of corporate customers' payments business and boost its position as a global correspondent bank.
The Frankfurt bank announced its FX4Cash service last week, and Tim Merrell, the global-transaction-banking head of the new service, said 17 clients are preparing now to test it.
Another 50 companies are in the pipeline, he said, about equally mixed between corporate clients and regional correspondent banks.
Mr. Merrell said that a growing number of businesses are trying to consolidate their global banking at fewer financial services companies and that the new payments service could attract business from them. "This is the next phase of that strategy," he said.
The FX4Cash service can handle payment instructions for high-value wire transfers, low-value automated clearing house payments, and checks, he said, and could be especially useful to companies making dividend or pension payments across borders. "Now, they don't have to maintain that local currency account where they don't have much volume," he said.
Mr. Merrell said that, though Deutsche Bank is the world's No. 1 provider of global foreign exchange services and has extensive cash management capabilities worldwide, "we haven't done a good enough job of linking the two together."
Though FX4Cash draws on the resources of Deutsche Bank's global markets division and its transaction banking division, "this is a separate business unit that straddles those two organizations," he said.
And though his examples were of relatively low-value payments, he also predicted that the service would "tap into a wide range of different uses."
For instance, FX4Cash could tie in with Deutsche Bank's existing db-eBills service, an electronic invoicing system developed for supply chain management, he said. "It's an easy linkage for our existing products."
FX4Cash lets users initiate cross-currency payments from 18 funding currencies to more than 75 local currencies, and it builds on Deutsche Bank's upgrades of its money transfer, electronic data interchange, and Swift messaging systems, he said.
"This ties in to those upgraded capabilities," Mr. Merrell said, "regardless of how the customer comes into the bank."
Deutsche Bank says it hopes to use the new system to attract business in both foreign exchange and cash management. It competes against other large international banking companies, such as Citigroup Inc., and nonbanks, such as the foreign-exchange specialist Travelex Currency Services Inc., a unit of Travelex PLC, which last September bought a rival, Ruesch International.
"Outside of those top competitors," Mr. Merrell said, "it's a very fragmented market."
Nancy Atkinson, a senior analyst at the research and advisory firm Aite Group LLC in Boston, said that other banks also have begun integrating foreign exchange into their cash management offerings but that Deutsche Bank has a global scale matched by few others.
Foreign exchange has shifted in recent years away from telephone orders to the Internet, she noted.
"Online foreign exchange is especially useful when you have a lot of cross-border payments," she said.
From the customer's standpoint, the integration simplifies the business process, Ms. Atkinson said. "If you can keep it all in the same platform where you don't have to take it offline and disrupt the workflow, it's better."
