While Australia’s big banks eagerly encourage their agribusiness customers to seize export opportunities in Asia or further afield, the cost and hassle of getting paid – and swiftly – can be a sore point in the farm sector.
New finance service players are invading traditional banking territory offering what they claim are better and cheaper services when it comes to handling money transfers or providing currency broking advice for a diverse new class of small to mid-sized farm product exporters.
UK-based financial technology firm World First is among those offering banking “disruptor” services, competing head-on with traditional bank roles.
Where a bank might charge two per cent or 3pc margins on currency transaction, World First has made its mark by taking just 0.9pc.
It also boasts faster transfers into client’s accounts and 24 hour, seven day a week contact with a designated account manager or a currency exchange dealer, if a client requires.
“Farmers and farm exporters are good examples of business people who don’t work banking hours, but often need access to the right advice when they are in the office,” said senior corporate foreign exchange adviser, Alex Cook.
Mr Cook’s own clients include farm-based pulse crop exporters and regional grain trading businesses shifting up to 250,000 tonnes overseas annually.
“They may have long relationships with their bank, but they aren’t necessarily getting the level of service they need as agriculture becomes more focused on establishing new markets overseas,” he said.
“For the big four banks, dealing with foreign buyers or small and medium sized farmers with minimal collateral entering foreign markets for the first time is often seen as a bit too hard and too risky.
“There’s no obligation to trade with us, and we don’t want to fracture banking relationships with customers, but the cheaper rates associated with our currency service are quite attractive to farm sector exporters whose margins may be quite thin.”
World First had saved one new grain export client about $10,000 since last November simply by handling monthly transactions for a much more acceptable fee and establishing an attractive currency hedging program.
Mr Cook said any savings made quite a difference to export returns, especially in the grain sector where increasing Black Sea competition had made exporting hard for Australian traders.
The dollar’s reluctance to keep falling as expected this year was also a stress on grain, meat, wine and dairy export margins.
As currency brokers, World First could implement hedging programs which locked payments at a lower exchange rate, or within a trading range, lower than the dollar’s current value.
The company, founded 12 years ago, is now one of the world's fastest growing financial technology companies, with offices in Singapore, Hong Kong, the US, the Netherlands and Sydney.
Plans are also afoot to open a New Zealand office.
Australia’s agribusiness market opportunities, enhanced by recent free trade deals in Asia, have prompted World First to assemble a team focused on exporters in the meat, livestock, grain, wine and other farm sectors.
“We are seeing significant activity by small to medium sized farming operations who are quickly learning the ins and outs of the global export markets,” said managing director Andrew Porter.
“A big new order can make or break a fast growing export business which has had to make a significant upfront investment before revenues start to flow in,” Mr Porter said.
“Sitting down with a meat or livestock exporter and assessing the best approach to get their foreign exchange right has probably never been more important for these people.
“Many don’t have time or resources to have their own treasury manager or to become experts on foreign exchange.”
Many agricultural businesses now venturing into export ventures had invested significantly to build their farm, processing or trading operations to a sustainable commercial level and could not risk now having revenues eaten away by currency shifts.
“The Australia-US dollar exchange rate has had a volatile run in recent months, ranging US10 cents since hitting January’s seven-year low of US68c, and it shows no signs of settling down,” Mr Porter said.
World First trades more than 120 currency options and offered accounts in all major markets via ties to international investment banks such as UBS and Citibank.
Its founders originally worked at Citibank.
Interestingly, about a fifth of World First’s global business now comes from private clients who need to exchange money to buy property or pay tuition fees.