On Monday (8 May), InvestorDaily revealed American Express (Amex) would discontinue its Foreign Exchange International Payments (FXIP) offering in markets outside of the United States.
The company has informed its business customers that it would cease providing FXIP services before the close of the 2023 calendar year.
Off the back of the news, fintech competitor Airwallex has stated its intention to seize on the opportunity to grow its Australian business customer base.
Matt Sek, Airwallex Australia vice-president of SME and growth, said the company has launched a new campaign to attract former Amex customers into its fold.
“Aussie companies relied on Amex to manage their international transactions and they’ll need a new partner with the right financial infrastructure to support them,” he said.
“For some businesses, this will be a big change to their operations…”
The company is offering $20,000 in free foreign exchange services to former Amex customers making the transition, claiming it would not charge fees or earn margin.
“We know the stress many businesses will face as they look to move their business,” Mr Sek added.
“We’re Australian-born, we understand the needs of Aussie companies, and we have the global financial infrastructure to support growth beyond our borders with bank accounts in over 60 markets, a multi-currency wallet in 44 currencies, and payouts to 150 countries.”
Amex is yet to formally announce the global FX pivot, described by a spokeswoman as a “strategic business decision”.
The payments firm was unwilling to disclose the size and scale of its FXIP operations outside its US headquarters, but claimed it was not a “material part of the global business”.
A wind down of its Australian FXIP workforce has also commenced.
Amex’s decision follows significant foreign exchange volatility in response to aggressive monetary policy tightening from the world’s central banks.
The US Federal Reserve has lifted rates by a cumulative 500 bps since commencing its tightening cycle in early 2022, most recently actioning a 25 bps increase to take the funds rate to 5–5.25 per cent.
Amex flagged the risks of interest rate hikes on FXIP earnings in its 2022 annual report, warning “adverse currency fluctuations and foreign exchange controls” could “decrease earnings we receive from our international operations and impact our capital”.
However, the company did not hint at a large-scale revamp of its FXIP strategy but said it would explore options to soften the blow.
“We aim to minimise market risk from these activities through hedging, where appropriate, and the establishment of limits,” Amex stated.
“…The actual impact of interest rate and foreign exchange rate changes will depend on, among other factors, the timing of rate changes, the extent to which different rates do not move in the same direction or in the same direction to the same degree, changes in the cost, volume and mix of our hedging activities and changes in the volume and mix of our businesses.”
Over the course of 2022, approximately 22 per cent (US$11.5 billion/AU$17 billion) of Amex’s total revenues (net of interest expense) were generated via business activities outside the United States.
APAC generations contributed approximately US$3.8 billion (AU$5.6 billion) or 7 per cent of total group revenue.
“We are exposed to foreign exchange risk from our international operations, and accordingly, the revenue we generate outside the United States is subject to unpredictable fluctuations if the values of other currencies change relative to the US dollar, which could have a material adverse effect on our results of operations,” Amex stated in its annual report.
