Delivering growth has always been at the top of the agenda for financial institutions. Yet scaling to compete often brings fresh challenges. In the past, only the largest banks had the resources to take advantage of centralized FX operations – gaining sharper pricing, elevated customer services, and, most crucially, strengthened risk management.
Today, centralization is no longer reserved for a limited few. For banks and financial institutions of all sizes and structure, it has never been more affordable to centralize FX operations, and the business case – improved efficiency, increased revenue and superior customer service – has never been clearer.
From expansion to fragmentation
The banking industry has been on a fascinating journey the past fifteen years. Mergers and acquisitions have helped banks expand into new markets and be better placed to compete. This was the idea, at least, but it has not always been the case. Instead of achieving seamless scale, many of these newly formed entities inherited fragmented systems, siloed infrastructure, and disjointed FX operations.
Even without M&A, legacy complexity and technology decisions at a regional level have created inefficiencies for banks that limited central insight into trade flows – an issue made more acute in volatile markets.
Meanwhile, fast-growing fintechs and neobanks – unburdened by legacy systems or silos – have delivered digital-first services from day one, raising the bar for customer expectations.
The good news? Technology to overcome fragmentation and centralize trading operations is now accessible to all. Advances in SaaS and API-first infrastructure have levelled the playing field, empowering banks to create a single, central trading hub at a fraction of the cost of traditional systems.
Advances in SaaS and API-first infrastructure have empowered banks to create a single, central trading hub at a fraction of the cost of traditional systems
From fragmentation to consistency
There is no standard issue approach to centralization, and different institutions will reap multiple advantages in their own way. Some Integral clients find the biggest gain comes from bringing small ticket transactions into their central treasury. This gives a clearer picture of trade flows compared to multiple divisions acting in siloes. Crucially, the benefits go beyond the FX desk. It enables better FX pricing for the entire group across a wide variety of products, platforms, and client segments.
This consistent approach brings in optimized pricing, but it need not come at the cost of unique service provided locally. Many choose to maintain individual branding and localized workflows to keep the regional identity and services their clients value. Behind the scenes, however, the overall operation runs through a central hub – on a single platform instance – for better pricing and, importantly, improved risk management.
Centralization leads to internalization
The case for centralization becomes even stronger when banks stop to ask themselves not only how much money they are losing through inefficient operations, but how much are they making for their rivals?
On any given day, particularly for the most highly traded currencies, one part of a bank will be buying or selling a currency with no insight into other trades being made across the group or the group’s overall position on a variety of currencies. By treating each trade individually, a share of the spread will leak outside the organization.
A centralized FX function changes this by giving full visibility into the trades carried out across all branches and offices. Rather than automatically looking beyond the organization, transactions can be internalized wherever possible.
This consolidated view of current trades, trading history, and forward positions allows potential exposures to be spotted early. It ensures positions can be balanced across the organisation, with risk managed collectively rather than in isolation.
The result is not only higher revenue and improved trade flows, but also a stronger competitive position to win higher-tier clients.
Strategic flexibility
Our message to customers, based on how financial institutions are using our technology, is simple: there is no one-size-fits-all approach to centralization. The technology is flexible enough to align with each institution’s strategy, organizational structure, and their local branding, workflow, and customer requirements.
With advances in affordability and ease of deployment, fragmented trading is no longer worth the risk or competitive disadvantage. Centralized services can now be implemented without the massive budgets or developer teams once needed. This is how neobanks and fintechs have launched centralized services from scratch. Today, institutional-grade technology that delivers on centralization can be implemented, maintained, and secured at a reasonable cost.
Modernizing is no longer optional. The technology is affordable and adaptable; it just needs institutions to be focused on moving from a fragmented approach to building a modern trading powerhouse that opens the door to higher-tier markets.
