OANDA’s Culture - a Fintech Fit
From a people and culture perspective, I appreciate the values of OANDA, particularly surrounding how it was founded. OANDA was founded in 1996 and was done so because there was a lack of transparency around what defines a good FX rate. OANDA was founded in part on a desire to be fair, a desire to be transparent, and the desire to disrupt the existing status quo. Those desires have stayed in the organization through its twenty-one year history, and that was something that resonated a lot with me.
I think we still have the same enthusiasm as when we started. While our core business is trading in FX, we have increasingly become a multi asset trading company and our rates business has grown exponentially in the last few years. I am very proud of what our team has accomplished.
We’ve now launched the payments division of our business. We are building towards being that trusted brand in global currencies, be it to a retail customer or an institution that wants to trade currencies or other similar assets through us. Our goal is to be the trusted solution in a variety of situations, for the retail or corporate customer that wants to send money cross border, or even just the corporate client who wants accurate, easy-to-consume FX data for a variety of their applications.
Problem Solving for CFOs
One of my prior roles at OANDA was as CFO of the company. As you talk to other CFOs and treasurers, you realize that there’s a very strong need for getting accurate FX data for your bookkeeping purposes. A CFO needs accurate FX data for any single transaction that a company makes.
Companies are increasingly becoming global. Many companies have multiple entities; one in the US, one in London, one in some other part of the world. Many of these companies are trying to bookkeep in their local currency, but then their parent entity has to manage everything in the USD or GBP or wherever their headquarters are located.
Making sure that those translations are accurate with no misstatements requires accurate FX data. This is why even the Big 4 accounting firms in the US use OANDA's FX data as they look through audits. I am very excited about where we are. Three and a half years into the company, I feel justified about my excitement and it still continues.
The Journey To International Payments
A lot of things at OANDA happen because we identify a client need.
It simply comes down to that. We are a tech company, we can build different technologies and we can build different solutions. Our primary business is trading, which is primarily retail clients, some institutional clients, small hedge funds and some corporations that trade on our platform.
We have a lot of corporate clients who consume our data, so we asked them, what else are you looking for in the FX space? The logical answer was - I need two things - one is, I need a cross border payment solution, either very simply to transfer money between different entities, such as for a US company with a huge European employee base that needs to move money for payroll expenses and things like that. And the other one is doing business transactions, accepting payments from clients, paying vendors, all that kind of stuff.
Particularly in the SMEs space, we found our clients were very happy with our data. They were looking at some of the rates that we provide on the trading platform, but trading is different because you’re not doing cross border settlement. But clients would come to us and say, can you help us with cross border payments and not just the FX rates. Other would say that because some of our payments are not so predictable, can you help us with the hedging solution?
OANDA's Transparency Created a Natural Need for Payments
I think client access to OANDA's rates is just one part of our most recent development into the payments space. Typically, if you think about how a very large corporate, a Fortune 500 type corporate manages payments, they have a dedicated treasury team that is very sophisticated and they have direct line access into the deep liquidity of banks. The level of service they get is unmatched.
If you look at the other end of the spectrum, which is a mom and pop small company, and looking to get that level of service, most likely they have a bank account with their local bank and the local bank then has to work with the bigger banks, there are a bunch of layers in their customer service, and the quality of service and the quality of information is not there. Customers are not just concerned with the pricing element, there’s also the question of easy solutions.
Customers want online solutions, they don’t want to have to call someone, but they want to be comfortable with the rates they are getting. It may not be as competitive as a really large organization, but still it is not something that they would be paying at a money transfer counter in an airport. That is where we were seeing it, they were saying, look you’re giving us accurate data. In the space with which we are most active, which is a mid-sized corporation, they’re saying, look we have interaction with regional banks, but we’re still getting accurate rates from you, and they’re not necessarily a lot of deep banking relationships that they have where they can unbundle who they work with on what. And their teams are also looking for, or are just starting to put into place ERP systems, so they want rates that come into that, they want an ability to transact online.
If you look at our partnership with Western Union, they have notifications about rates dropping. Clients are looking for information in an easily consumable manner. And that’s the direction that we are going in, which is how do we make these transactions more automated and more user friendly. And if you look at our platform and the time period we have operated, FX has become more electronic on the trading side. How can we bring some of that know-how into this partnership, and that’s what Western Union values on our side. The sweet spot for us is really the small to mid sized corporations, corporations that are growing in their international presence.
How Data Can Help Problem Solve
If you really think about it from a CFO or treasurer’s perspective, particularly at an SME, they don’t have the capacity to have a large treasury team, but they still face the same questions that a large organization faces.
- I have a particular exposure, every month I get payments from a particular customer or every month I make a payment to a vendor, just because that works like clockwork. What’s my exposure?
- If I look at it over the course of the last 12 or 18 months in some currencies, effectively my dollar payment has been from here, all the way to here.
- How do I lock in some of those rates? Obviously, no one can predict the future, but how do I understand what the different scenarios are?
- How can I hedge some of that exposure and live with a level of exposure that I am comfortable with?
- If the range is going to be this, how do I mute that range?
Those are the kind of questions CFOs and Treasurers of SMEs are asking, and at OANDA we are starting to work on launching some products, hopefully at the end of the year, that will start to help our SME clients. Through this we will combine data providing, historical data, to help clients understand what the future will look like and then help hedge that exposure.
To read the full article written by Andrea Barnes and Daniel Webber of FX Compared, please visit: https://www.fxcompared.com/magazine/company-profiles-insights/oanda-ceo-vatsa-narasimha-future-payments