FX and Tech: Data Integrity in the Age of the Borderless Transaction

FX and Tech

Now more than ever, those who build and maintain transactional systems need to have a solid grasp of foreign exchange—what it is, how it works and most importantly where to find reliable data on a marketplace that is notoriously fragmented and volatile. As part of a new series, we discuss the growing relevance of FX in an enterprise IT setting and what tech professionals need to know about building systems that can accommodate multiple currencies.

No doubt about it—global commerce is alive and well. Not only are the vast majority of commercial transactions now fully electronic, they are also highly likely to take place across borders and involve more than one currency. This is equally true for both consumer and business-facing applications; whether a retail website, personal banking app or vendor management system, developers and technology professionals must now ensure their programs can execute accurate currency conversion based on prevailing exchange rates.

Perhaps the most challenging aspect of this is retrieving the most up-to-date rate information. Not all FX rates are created equal. Because the over-the-counter forex market is not a centralized exchange, the quotes can vary greatly depending on the source. Unlike the stock market, which provides a single ubiquitous rate for a unit of stock, foreign exchange rates can have different fees or spreads built in depending on who is reporting them.

To assess the quality and accuracy of FX rates, it should be established whether the provider is a market maker or a data aggregator. Market makers facilitate the buying and selling of transactions on the open market; these are typically banks or brokers. These rates are the most accurate, representing an actual, completed transaction. Data aggregators, on the other hand, collect rates from multiple sources and compile the data. These are secondary--not primary--data sources, and their accuracy is less assured.

Above all, developers and product managers need access to a reliable, secure data feed API that can be integrated easily into an existing architecture.

In coming weeks, we will look at some of the various use cases for exchange rates data for developer teams and tech professionals.

These include:

·       Price Localization – Companies rely on FX data to convert prices for their goods and services in local currencies.

·       Prediction & Forecasting – Some companies, especially in financial services, depend on FX functionality to make assumptions about future currency movements based on historical data.

·       Rates Redisplay – Companies that execute live currency conversions for redisplay on their website would ingest rates to project on their website or application

·       Product Development – Developers and IT teams utilize real-time exchange rates to power the products and web applications that they build for companies and customers.

In a transactional environment that is faster, more automated and more interconnected than ever before, tech teams need to become fluent in FX functionality. This begins by making sure the product or application not only delivers data in a reliable and secure fashion but also reflects the most accurate exchange rates available.