Corporate and correspondent clients are becoming more comfortable with transactions over the Internet, so major banks are pushing online foreign exchange trades.
In recent days both J.P. Morgan Chase & Co. and Mellon Financial Corp. have incorporated online forex initiation into their cash management offerings. Wells Fargo & Co., which is working with the Atlanta software vendor S1 Corp., announced its version of the capability Thursday. The service particularly targets small banks that could in turn offer it to their clients.
"Post-Nafta and with the advent of the euro, more business customers are buying or selling goods and services internationally," said Gregg Napoli, a senior vice president in Wells Fargo's foreign exchange services group.
Jacob Jegher, a senior analyst in the banking group of the New York research firm Celent Communications LLC, said banks will need to offer such services to serve converging world markets.
"As we enter a more global economy, the need to facilitate cross-border transactions is going to become increasingly important," he said in an interview.
For example, Mr. Jegher noted that the worldwide volume of Swift payment messages rose to approximately 1.2 billion in 2003 from 708 million in 1999 - a compound annual growth rate of 14% during a period of global recession and rising international tensions.
Swift, the Society for Worldwide Interbank Financial Telecommunication, supplies standardized financial messaging services and interface software to banks worldwide.
Corporations are looking for ways to pay their international suppliers quickly, easily, and inexpensively, Mr. Jegher said. "That's a push by the corporations. It's driving banks to meet these demands."
JP Morgan Treasury Services' Foreign Exchange Funds Transfer Initiation, available worldwide to the New York banking company's corporate clients and regional partner banks, ties into the JPMorgan Access online system.
"We're providing wholesale rates to the retail market. I think that's quite key" to improving the transparency of the forex process, Colin Digby, JP Morgan Treasury Services' head of product strategy and solutions in Europe, the Middle East, and Africa, said in an interview Thursday.
The service offers automation and cost benefits and lets a global company fund transactions from accounts held at banks other than JPMorgan Chase, Mr. Digby said. "It's a strong efficiency play for our bank partners."
Mellon is integrating foreign exchange initiation into its online cash management system, Mellon iTelecash. Gary Sefcik, a vice president and a senior international product manager in Mellon Global Cash Management, said in an interview Thursday that the integration streamlines information reporting for corporations.
It also improves their compliance with the Sarbanes-Oxley Act and lets corporate clients execute currency trades from their cash management application rather than signing on to a separate system, he said.
Wells Fargo's new service is an extension of the San Francisco banking company's Foreign Exchange Online application, which lets other banks offer forex services to their corporate clients under their own brand names. Wells formally unveiled the new application in June 2003 after testing it with a group of about 100 correspondents.
Mr. Napoli said Wells now has about 400 banks reselling the service to their corporate customers.
New software from S1 provides a prepackaged front end that plugs into the vendor's Enterprise platform and its business banking application. The software connects to Wells' foreign exchange delivery system, using Web services to make the call directly to Wells system.
