Finastra, a UK-based financial services company, is collaborating with HSBC to offer cost-effective banking-as-a-service (BaaS) foreign exchange solutions to mid-tier lenders.
The service will run on Finastra's cloud platform and licensed institutions' regulated infrastructure, the company said on Thursday. It will be available from the second half of 2022, beginning with financial institutions in Asia-Pacific, with other regions to follow soon after.
The integration of the forex services of HSBC, Europe's second-largest bank, with mid-tier banks will allow them to deliver a wide range of currencies to their customers through branch networks and other retail channels, without requiring any additional technology integration.
“The ability to integrate forex directly into corporate treasury platforms, as well as competitive pricing and liquidity into a single package will help reduce friction for regional banks and their customers and demonstrates a use case in which BaaS can really make an impact," Angus Ross, chief revenue officer for BaaS at Finastra, said.
BaaS refers to the provision of retail or wholesale banking products and services, as a service using an existing licensed institution’s secure, regulated infrastructure with application-driven platforms. It is also responsible for the management, deployment and delivery of critical financial services to end users.
The value of the global BaaS market is projected to reach about $7 trillion by 2030, Finastra said in a 2022 report on the outlook for the industry.
About 85 per cent of senior banking executives surveyed by Finastra said they were already implementing BaaS solutions, or planned to do so within the next 12‑18 months, the study said.
The BaaS market is set to grow more than 50 per cent annually over the next five years, the Finastra study showed, with those currently with BaaS offerings primarily focused on retail banking.
The first phase of the new BaaS service will provide indicative and executable forex rates to regional mid-tier banks using a plug-in to Fusion Kondor, Finastra's global treasury trading operations management system, Finastra said.
This will be supported by the liquidity and robust risk management capabilities of one of the world’s largest forex franchises.
The service will offer clients highly-automated forex pricing capabilities, which in turn allows banks to process higher forex volumes and maintain their customer relationships, the statement said.
Corporate clients, meanwhile, will benefit from increased transparency of pricing and market conditions, improved ease of execution and simpler currency risk management.
HSBC is also looking at more partnerships to offer its forex services, said Mark Williamson, the bank's global head of forex partnerships and propositions.
“We are constantly seeking out strategic partnerships and channels to embed our forex services and build market-leading customer propositions," he said.
