The operational and financial backbone of any cross-border payment business is its FX capability, its liquidity arrangements and its clearing infrastructure. Getting these right determines your margin, your speed to market and your ability to compete. Steven Faulkner has built and managed these capabilities at HSBC, JPMorgan Chase and across multiple payments ventures over 30 years.
Speak to StevenForeign exchange is embedded in every cross-border payment. Managing the exposure, sourcing competitive rates and structuring your liquidity arrangements correctly is the difference between a profitable corridor and a loss-making one.
Selecting the right hedging approach for your payment volumes, currency mix and settlement cycles. Spot-only models are simple but leave you exposed to intraday rate moves. Forward contracts, options and natural hedging each have their place depending on your business model and risk appetite.
Identifying and securing the right FX liquidity providers — banks, non-bank market makers and aggregators — for your specific currency pairs and volumes. Tier-1 bank relationships offer depth and stability; non-bank providers often offer tighter spreads at lower volumes. The optimal mix depends on your corridors.
Managing the funding cycle — pre-funding requirements, intraday liquidity, settlement timing and reconciliation — is operationally demanding. Errors here create both regulatory risk (safeguarding breaches) and counterparty risk (failed settlements). Getting the operational model right from day one avoids costly remediation later.
A nostro account is the account your institution holds at a correspondent bank in a foreign currency. Managing these relationships — the balances, the costs, the operational dependencies and the risk of de-risking — is a core operational discipline for any cross-border payments business.
Optimising your nostro footprint — which currencies, which correspondent banks, which jurisdictions — to minimise idle balances, reduce fees and maintain operational resilience. Over-nostro-ing is expensive; under-nostro-ing creates settlement failures. The right network is specific to your corridor mix and volume profile.
The payment service provider market — banks, non-bank PSPs, alternative rails, aggregators — is extensive and constantly evolving. Selecting the right providers for each corridor, managing the relationships, monitoring performance and maintaining diversification to avoid single-point dependency requires ongoing attention.
Access to clearing infrastructure — the systems that settle domestic and international payments — is foundational. Each currency has its own clearing architecture, access models and regulatory framework.
UK sterling clearing operates across Faster Payments (retail, real-time), CHAPS (high-value, same-day) and Bacs (bulk, next-day). Direct participation requires settlement account access at the Bank of England. Indirect access is available through a sponsoring bank — with lower cost but greater dependency.
US dollar clearing runs through Fedwire (Federal Reserve, real-time gross settlement) and CHIPS (Clearing House Interbank Payments System, net settlement). Access for non-US institutions is typically through a US correspondent bank with a Fedwire account.
Euro clearing within the SEPA zone via SEPA Credit Transfer (next-day) and SEPA Instant (10-second, 24/7). Post-Brexit, UK firms require a European entity or SEPA-connected correspondent. Mandatory SEPA Instant participation for eurozone PSPs from January 2025.
Domestic clearing systems in Africa, Asia and Latin America — NIBBS (Nigeria), RTGS systems, mobile money rails — each with their own access models, settlement risks and operational characteristics. Direct experience from 30 years of building payment infrastructure in frontier markets.