Our flagship series will propel you to the forefront of the global ecommerce revolution. From analyses of breaking current events to the intricacies of navigating cross-border sales and regulations, Business over Borders entertains and informs any audience who wants to learn more about how international ecommerce works.
Welcome to Business Over Borders. I'm your host, Leo Tucker, and I'm joined here by a very special guest, Sam Ranieri, our CEO and founder here at Reach. Welcome. Thank you.
Sam Ranieri:Thanks for having me.
Leo Tucker:So we're gonna talk about FX today. I know that's your your bread and butter, the thing you you eat day and night.
Sam Ranieri:For the most part. Yes.
Leo Tucker:Let's talk a little bit about kinda your background in FX, how you got started,
Sam Ranieri:Sure. Yeah. So I'm well, this is gonna age me. I'm about 25, almost twenty five years in foreign exchange.
Leo Tucker:Twenty five years.
Sam Ranieri:Yeah. I've been doing it for quite a while, and foreign exchange touches a lot of part of the the global market from importers and exporters to ecommerce and banking, etcetera. So I cut my teeth actually early days and just, helping, importers and exporters in Canada with their sort of hedging requirements and, sort of, banks had, products and solutions for them, but they were really focused on, like, enterprise level, companies. And there was sort of a mid market that was neglected for for lack of a better term that, needed some, needed some help and some guidance on how to navigate through currencies and reduce their risk and even sometimes turn it into a profit center. So I spent a lot of time there and then saw a pretty big opportunity in ecommerce where, obviously, there's a lot of cross border sales happening, and and foreign exchange is is very prevalent in cross border, ecommerce.
Sam Ranieri:So I took my, knowledge, around hedging and, some very, great relationships that were built through my, banking days and, built out a model to sort of support that.
Leo Tucker:We just covered a lot of terms. So we've talked about mid market. We've talked about exposure. We've talked about risk. Let's talk about FX generally.
Leo Tucker:What is FX? Why do businesses care? Paint us a landscape.
Sam Ranieri:Well, before we even get into into FX or foreign exchange, right, like, there's there's just the global currency, you know, topic, which is, you know, the currencies are priced differently against each other. We call them pairs in the in the currency world. Right? So you look at, you know, obviously, you we're we're North America, so the US dollar is obviously one of the most prevalent currencies. So Yeah.
Sam Ranieri:You're always com comparing that pair, if you will. Now, you know, more recently, the US dollar is surging. Right? Very, very strong US dollar against more currencies.
Leo Tucker:Unfortunate for us Canadians, but it's great.
Sam Ranieri:It does. Exactly. Perfect segue into what I was gonna explain is that if the US dollar is high, no matter what you're buying, if it's coming from The US, it's gonna be more expensive for a Canadian. Right? And that goes from everything from a magazine to, oil and gas.
Sam Ranieri:Right? Yeah. So everything that moves, every sort of thing that's involved in trade, if it's a stronger US dollar, if it's from The US, it's going to be more expensive to the other currency pair. Flip side of it is, The US have much more stronger buying power. Right?
Sam Ranieri:So you'll get a lot more Americans, obviously, shopping in Canada, The UK, Europe. Right? So their dollar goes a lot further. So, you know, then you've got this sort of yin yang thing happening. Right?
Leo Tucker:So
Sam Ranieri:US dollar is stronger. Maybe their exports or or imports are a little bit lower, but they're stronger, so they're buying more. So their exports are are are are increasing in sales. And that just goes for every currency pair. Right?
Sam Ranieri:That goes for euro against the pounds. Australians are are are heavy in the marketplace and, you know, wherever the Australian dollar lands. So that's more of kind of your global currency POV.
Leo Tucker:Right. So let's let's take it from the lens of a merchant, a store owner. You know? Let's let's stick with ecommerce at the moment. You know, you've got a let's say you've got a Canadian merchant selling into Canada, probably not dealing with a whole lot of FX.
Leo Tucker:But let's say they wanna start selling to The US or in the Euro or into, into, The UK. What what kind of
Sam Ranieri:things are they concerned with? And Yeah. So for for first off first off, there's kind of two two two areas that, are two two types of merchants in in in the world right now. Right? And, obviously, there's more, but you know what I mean.
Sam Ranieri:There's a merchant that's just sort of saying, you know what? Let's just use US as an example. I've got US dollars. I'm gonna sell in US dollars.
Leo Tucker:Mhmm.
Sam Ranieri:And I'm gonna let the banks and the processors in the middle handle all of that foreign exchange stuff. Right? It's like, I don't really care. Right?
Leo Tucker:And We've all been to websites where you go to buy something, you know, and it's only in US dollars or British pounds all the time.
Sam Ranieri:Right. And as Canadians, we're like, you know, check the rate on Google, and, I mean, there's no spread in that. But you generally get an idea of what you're paying, but that merchant is basically just saying, I'm gonna charge US dollars and let it go. Now while that transaction's happening, there's a bunch of banks in there that are applying foreign exchange. They're applying spreads.
Sam Ranieri:Shopper doesn't really know what they're really paying for that. To your example in Canada, you can do a quick search on Google, but it's just gonna give you a mid market rate, which has no spread in it. It's not a buy sell rate.
Leo Tucker:A credit card will have line items for, you know, FX fees and Yep. It's always a surprise.
Sam Ranieri:Exactly. Right? So although simple for the merchant, you're leaving a lot to sort of out there in the market. Right? You know, the last, I would call it, five, six years, you're just noticing a lot more technology in the space, which allows for multicurrency pricing.
Sam Ranieri:And there's some other things that are evolving, where that that can allow you to obviously localize that that cart for the shopper. I mean, as a Canadian, we like to shop in CAD.
Leo Tucker:Sure.
Sam Ranieri:Every time
Leo Tucker:if I get the chance.
Sam Ranieri:Right. So, you know, there's some tools that you can enhance that sort of first first preview that I was speaking of, but generally speaking, you're not really involved in foreign exchange. Then there's the other side, which is a little more sophisticated, and that's sort of where my advice would go is get into the foreign exchange. Right? And and when you get into it, some people view it as possible risk.
Sam Ranieri:But from my seat, I view it as opportunity. Right? So rather than just doing multicurrency pricing, get multicurrency accounts. Right?
Leo Tucker:Mhmm.
Sam Ranieri:And now you've got the control and flexibility to price your products aggressively if you wish. You can take different approaches of how you price your products in foreign markets. It can be I'm competing with the incumbent retailer in that country. So I wanna make sure that I have control of what what's going on so that my my product gets purchased before it does from that incumbent. You can go all the way to different hedging strategies.
Sam Ranieri:You might have a natural hedge is what we call it again, throwing all these crazy terms at you, but
Leo Tucker:We'll come to that shortly.
Sam Ranieri:Yeah. There's a lot of merchants that might have payables in Europe, and you're selling into Europe. Well, it doesn't really make a whole lot of sense for going from euro to dollar only to buy the euro back to to pay your invoice . Or doing it again in a way that you don't even really know. You're just on
Sam Ranieri:So much spread that's lost. We'll get into spread in a minute. So, yeah, it's, you know, get into it. There's there's a a plethora of options right now to get multicurrency accounts. You can get, you know, digital accounts.
Sam Ranieri:You can get, virtual accounts. I should say they're not digital accounts, but virtual accounts where you can get into the mix. Right? And then you're you know, get get, get a processor to settle to you in what we call like for like fashion And have a little bit more control.
Sam Ranieri:Right? Now that's a double edged sword
Leo Tucker:Right.
Sam Ranieri:As you can imagine.
Leo Tucker:So let's delve into that a little bit. Some of the risks, some of the benefits
Sam Ranieri:Yeah.
Leo Tucker:Weigh it out a bit.
Sam Ranieri:Yeah. So now you're in it, and, you know, we talked about the the benefit of obviously being control of pricing, etcetera. But now you're opening yourself up to some risk. Right? Currencies are always moving.
Sam Ranieri:Yeah.
Sam Ranieri:yeah. And, you know, there's there's, you could be holding on to say, like, just to simplify selling in Europe as a US Merchant. You're aggregating a bunch of euro dollars into a into an account, right, into your like, I just mentioned to your euro account. At some point, you have to trade it back. You have to get your money back to US dollars.
Sam Ranieri:You have, employees to pay. You have marketing expenses.
Leo Tucker:You have to move into Nice.
Sam Ranieri:You can have a little, you know, a little, wine country fund going, of course.
Leo Tucker:But That's when business goes really well.
Sam Ranieri:That's right. But, ultimately, that's gotta come back. And the risk that you'd be faced with in that situation is that, you know, the euro against the dollar, declines, and now you're getting less dollar when it's coming back. So the market's moved against you, to say it in a different way. So markets moved against you, and you're not getting as much back from that as you originally anticipated.
Sam Ranieri:And that's where hedging strategies come into the mix. Right? And, basically, around that is is really around, number one, what's your what's your look what's your natural hedge? Right? Do you have payables there?
Sam Ranieri:What are you going to bring back? What's the timeline to bring that back? And you can start to, to to implement certain strategies. You can you can book forwards. Right?
Sam Ranieri:So there's a lot of forwards that are available.
Leo Tucker:Tell us
Leo Tucker:a little bit more about that just for those out there who might not be familiar with the forward.
Sam Ranieri:So forward, you you can you can basically book out a foreign exchange contract out for up to ninety days. Some banks will go a little bit further, but it starts to get a little bit risky. But you're basically locking in today's rate for ninety days.
Leo Tucker:Oh. That's huge.
Sam Ranieri:It is. So you can Forecasting. Yeah. Now remember, foreign exchange is always a double edged sword because once you're locked at that rate, well, if the markets goes in your favor, well, now your forward rate is is under market.
Leo Tucker:You don't get that upside, but you cut your downside.
Sam Ranieri:You cut your downside. Exactly. So, obviously, that's a risk mitigation tool. Right? And and and sort of that capacity is really around, I want to know what I'm going to get back.
Sam Ranieri:Right? And that's a a very solid strategy is to is to book yourself in a forward. We'll get into returns in a minute, but just to continue on the thought of the the hedging strategies, really, what it comes down to as well is is is understanding when that trade should happen and understanding that you shouldn't just let it, sort of go out to the market, and just take your bumps and bruises with the market. That's the that's the worst type of strategy. Now there are tools available out there where you can actually lock the, trade at the point of sale.
Sam Ranieri:Right?
Leo Tucker:Right.
Sam Ranieri:Now again, while you're in control of that FX, you're now removing three or four spreads through that traditional workflow that I explained, which is kinda just let someone else handle it
Leo Tucker:Right.
Sam Ranieri:Or let the market handle it. If you're in control of the foreign exchange, you can now adopt certain, strategies that that let you get out of the market a little bit sooner at a much better spread. In in foreign exchange, you've got the foreign exchange rate. Right. Call that a mid market rate.
Leo Tucker:Okay. And
Sam Ranieri:that's You go to Google.
Leo Tucker:You say, like, CAD to US. Boom. They give you a number.
Sam Ranieri:It's a rate. Right? Now there's a spread attached to the rate, and the spread is basically profit for the banks that are actually selling you the foreign exchange. So, you know, it's a it's a commodity. So I can buy let's just keep numbers simple.
Sam Ranieri:A dollar 45. That's what a Canadian dollar is to a US dollar. Right? But that mid market rate is not available to the general person buying a dress.
Leo Tucker:No one's gonna give you that number you got from Google.
Sam Ranieri:Exactly. So then you attach the spread, and the spread can be anywhere from 10 basis points if you're direct to liquidity providers, which is very difficult to get unless you're in the hundreds of millions, all the way up to I've seen spreads in the 9% range. Now on average, credit card companies, processors, landing around the two and a half to 3% range is is what's sort of in the foreign exchange world. But that's still two and a half, 3% between your product
Leo Tucker:Mhmm.
Sam Ranieri:And the shopper. Right. Right.
Leo Tucker:You're actually paying to that what you're seeing on Google there, like, that's where all the that's where the profit lives.
Sam Ranieri:Exactly.
Leo Tucker:In somebody's pocket.
Sam Ranieri:Is in the spread. So by, again, going back to opening up your currency accounts and getting involved in the foreign exchange, now you've got some power to be able to negotiate that spread.
Leo Tucker:Right. Now you're in the room with that.
Sam Ranieri:Down. Right? And most importantly, and I don't wanna call them out, but there are some alternative payment methods and wallets out there that really take advantage of this. And that's where you start getting into the you know, we've seen we've seen upwards of 5%.
Sam Ranieri:Let's just put it that way on a on a foreign exchange spread. Right? So that's a pretty big, That's huge. Increase. If you think if you're in a competitive market with a dress that's, you know, a hundred dollars, if yours is a hundred and 5, you're probably not gonna get the sale over the hundred dollars.
Leo Tucker:That's our provincial sales tax in Alberta.
Sam Ranieri:There you go.
Leo Tucker:That's it right there.
Sam Ranieri:There you go. Right. We kinda jumped around a little bit there, but it's sort of, you know, the the foreign exchange, the when I get back to the, automated, sort of process of foreign exchange, you can actually bring that spread down. And then the the opportunity that you have is you can start to hedge yourself in a way where if you're watching the markets closely or outsource that to a trader or, you know, reach has some really great people around this, which is letting you know when sort of there's a downside of the market just based on charts. I mean, everybody buys stocks.
Sam Ranieri:So you you're you're you're never gonna catch the bottom. But if you're generally speaking
Leo Tucker:You know where you're at in the trend of this.
Sam Ranieri:Exactly. Then you can start turning it into into a revenue center. Right? You can start to to adopt some some strategies that, and, again, that revenue center can either be keeping the price of your products lower all the way up to keeping your price the same, but inheriting some more options.
Leo Tucker:More of that. So was this a strategy, I mean, reserved for large enterprise size merchants? Like, who, like, who should be looking out for this?
Sam Ranieri:Yeah. So it used to be very, very difficult to get multicurrency accounts. Right? Like, it was it it was very difficult up until even five years ago. The the introduction of virtual accounts and and, sort of banks being able to open up more, right, it's a little bit more accessible, right, to to sort of smaller merchants.
Sam Ranieri:But to answer your question, yes. It was generally reserved for a huge company with massive compliance teams that were able to get these. Multicurrency accounts, you're you're moving monies across borders. Yeah. There's a lot of compliance that happens in there.
Sam Ranieri:Right? So it's not as easy as setting up a an account and saying, let's do this. Right? So there is some complexity around that. Sure.
Sam Ranieri:But, again, there are companies now that are helping with this. Right? And there's there's just there, there there's more accessible tools in the market right now for you to actually jump into this type of scenario.
Leo Tucker:Right. So it's becoming more available to sort of the SMB, you know, medium sized businesses, you know, getting in there.
Sam Ranieri:They should be. Yeah. Go at it. Yeah. Anytime you outsource something, it's going to be more expensive.
Sam Ranieri:Sure. And if you're blind to it, something's going on, you know, on your products and on your sales. And foreign exchange is one of those things. Right? If it's it's one of those things where if you just let it go and let someone else deal with it, someone else is making money on your money.
Leo Tucker:Well, they're dealing with it.
Sam Ranieri:Exactly. They sure are. And nothing's free.
Leo Tucker:Alright. So we've talked a little bit about FX in general. You know, a couple of strategies, merchants can employ to, you know, get in the conversation with FX. Let's take it a little bit further down into the experience of the the customer.
Sam Ranieri:Mhmm.
Leo Tucker:So in a site, obviously, I've I've bought things. I bought a pair of boots recently from The UK. Great boots. I had no idea what they were gonna cost. They shipped, and I was surprised.
Leo Tucker:Oh, okay.
Sam Ranieri:Two x? Yeah. Exactly.
Leo Tucker:Yes. Yeah. And then, but about two pair? Because I didn't know the size. And I come from The UK.
Leo Tucker:I only wanna do this once. So I had to send one back, and there was a whole exchange return in there. Yeah. And it was a mess. So let's talk about, in your experience, what you've seen as the experience for the customer when they have to deal with businesses that do FX one way versus another.
Sam Ranieri:You're you're hitting
Sam Ranieri:a very big problem in the space right now, and it's definitely a solvable problem, but it's, it it's it's a problem. So like we were talking about with, a spread, there's what's called the buy sell, side of the of the currency market. Right? So the way the currency market works is you've got your mid market rate, like we talked about, then you've got your buy rate. Right?
Sam Ranieri:Buyer's rate, and then you've got your seller's rate. Not the same number. Not the same number. So the way it works is the seller's rate is the mid market plus spread. So let's just use two and a half percent because that's generally in the marketplace.
Sam Ranieri:Okay. And then you have your buy rate, which is two and a half percent. So mid market minus two and a half percent.
Leo Tucker:Right.
Sam Ranieri:Okay? So the banks will buy that currency from you from bid minus two and a half. They'll sell it for bid mid plus two and a half.
Leo Tucker:Oh, got it.
Sam Ranieri:Call it bid offer. It's actually buy, sell, bid offer. There's a few ways that you can explain this. In a return, you're on both sides of that transaction.
Leo Tucker:Oh, yeah. You would be. You're buying it and selling it right back.
Sam Ranieri:Exactly. So they're not gonna bear that cost. Right? So, basically, again, keeping numbers simple.
Sam Ranieri:This isn't a quote, but so you probably bought that those pair of boots for mid market plus two and a half percent. That was your Canadian rate versus GBP. Yep. When you flip it back to sell it to them or to return it to them, and they go to the market to refund you, their bid their mid market minus two and a half. So you're up 5%.
Leo Tucker:Yeah. Straight away.
Sam Ranieri:Right away. That does not include if you took two weeks to return it, any market fluctuation within
Leo Tucker:Mhmm.
Sam Ranieri:That. And, you know, if it happened during some sort of a a Fed meeting in each of the again, back to our pairs, when you watch your pairs closely, if it was a, interest rate announcements, those are all things that move currency rates.
Leo Tucker:Sure.
Sam Ranieri:So and if you're really unlucky, I mean, I've seen this. Believe me. I think it was when the Swiss franc, decoupled from the US dollar. It was about 2,016 or something like that, and it tanked something like 23 or 24%. Oh, no.
Sam Ranieri:Yeah. That was a bad day for a lot of people.
Leo Tucker:Oh, no.
Sam Ranieri:A good day for Swiss, but there's so many, market forces that can really drive that. So but at the end of the day, you're stuck with that. Right? Right? Oh, yeah.
Sam Ranieri:So you're you're definitely returning, and you're probably out the the shipping cost, and you're probably out. So Well,
Leo Tucker:I'm out the shipping cost, and then, you know, let's say they were a hundred bucks. They were not a hundred bucks, but easy numbers. They were a hundred bucks. I'm not sure I got a hundred bucks back.
Sam Ranieri:No. I know you didn't. Just don't look. Yeah.
Sam Ranieri:But that's what a lot of people do is just don't look. But when you look, it's pretty annoying. So the the solution there is back to the forward. Right? So or or some sort of a way to introduce a forward there.
Sam Ranieri:So, really, what you're doing is you're saying guaranteed refunds. Right? So you're basically saying, I'm gonna buy this for at this rate, and you can return for the same rate, right, out to ninety days.
Leo Tucker:Right. Because you booked that in for ninety days. So any exchange on that, you know, the initial purchase or refund up to that amount of time later Yep. That's what I'm expecting back.
Sam Ranieri:Exactly. So you got you have to look at it, and I don't wanna get too complicated here, though. But the two and a half percent, that's kinda like lost to market.
Leo Tucker:Yep.
Sam Ranieri:If you're in the currency accounts, you're not paying two and a half percent. You're probably around one, maybe even less depending on your volume. So right out of the gate, your actual spread is lower. Right? And then with the forward, now you take out the market fluctuation.
Sam Ranieri:Right? And you can guarantee the 1% on the way back. There are companies that do this. Reach actually has a product as well that that supports this. But, basically, it's it's here's your rate, and you can return on that, on that rate, for ninety days at the same at the same thing.
Sam Ranieri:So the customer returns at the same rate. Huge value, obviously, add shoes are are are a big returned item. So our clothing Yep. Like, it's just it's it's there. It's always there, and it's annoying.
Leo Tucker:Yeah. People are using their living rooms as the dressing room now. They just bring it right to their house and say, I like this. Well, you got it. Gotta go.
Sam Ranieri:You got it. Yep. So you touched on a pretty big problem there, but there are there are solutions for it. Now if you're in the in the camp of the sort of first camp going back to what we talked about before, which was just kinda letting other people deal with it Yeah.
Leo Tucker:Let them take care of it.
Sam Ranieri:Yeah. Your shoppers your shoppers dealing with that. Yeah. That's a bad experience.
Leo Tucker:I think it's what I that's that's where that merchant was at with my boots.
Sam Ranieri:Yeah. Yeah. They don't care.
Leo Tucker:In this example, I'm the boot company that I just bought the boots from. Yep. Obviously, they're letting they're letting everybody else handle the FX, and Leo's taken the downside of that. How do they get involved? How do they move from that sort of, you know, let everybody else handle it to getting more involved and, you know, making the conversation more interesting.
Sam Ranieri:Yeah. So so step one is you have to make sure that your platform can can support merchant. Like, obviously, if you're on a custom platform, you can. Like, that's straightforward.
Leo Tucker:Sure.
Sam Ranieri:If you're on another platform like Shopify or WooCommerce or or or others, Magento, all of those do support multicurrency. So you can get a multicurrency sort of app or if you will. But, ultimately, it's really a treasury play. So it's really your you have to, you know, go to a bank that supports multicurrency accounts. Mhmm.
Sam Ranieri:You start with sort of, I would say, your higher selling regions. Right? So, you know, your usual suspects, euro, Australia, pound
Leo Tucker:Yeah. Major markets. CAD.
Sam Ranieri:Yeah. And you just get the bank accounts there. Right? And now you tie the, sort of, you know, a multi currency solution to those bank accounts, and then it it becomes a treasury play. And this is where kind of the caution, comes in.
Sam Ranieri:Right? So, you know, you open up your accounts and you start loading them up and you're like, oh, no. I gotta trade them back. Well, you
Leo Tucker:know,
Sam Ranieri:pay attention because, again, you need some hedging strategies within there, and you need to sort of figure that out. You also have to, talk to your processor to ensure that they'll do like for like processing. Right? So, because most processors would they would prefer yeah.
Leo Tucker:They like the efforts. They like that spread too.
Sam Ranieri:They like to sell to you in in a different currency because, again, you're giving them the spread. Right? But most processors right now, all the modern ones will be supporting, what's called like for like processing. And, yeah, there there is quite a bit to this. It's you don't sort of, you know, say, okay.
Sam Ranieri:Tuesday, I'm gonna be in the
Leo Tucker:Just open up all my bank accounts in the five major markets, and we're selling by Thursday. Let's go.
Sam Ranieri:It's, it it takes a minute to get there, and there are some things that you really need to pay attention to, like, around that. And, obviously, just making sure that all of your vendors and support, can support this type of this type of volume. It's also how much sales are you really doing in global markets. Right? This does not make sense if you don't have a lot of sales in global markets.
Sam Ranieri:This is you don't really like, yeah. There's a there's a cost. There's a risk. There's a lift to doing all of this, and there's a sort of a a breaking point where it makes sense. Right?
Leo Tucker:And Yeah. Significant barrier of entry. So, you know, have some volume.
Sam Ranieri:You need the volume. Yeah. Or, you know, if you're growing into it, nothing's stopping you from sort of, you know, growing the volume first under a sort of, you know, let someone else deal with that model and
Leo Tucker:Sure. There's some overhead for managing that strategy internally as as any other business strategy.
Sam Ranieri:Yeah. There's different ways that you can the barrier to entry is is is is is a little bit higher if you wanna handle everything yourself, but you can still outsource certain components.
Leo Tucker:Like So I imagine you still have to have the bank accounts
Sam Ranieri:as a merchant. Like well,
Leo Tucker:yes. Always the nuance.
Sam Ranieri:Do you want well, the the golden ticket here
Leo Tucker:Mhmm.
Sam Ranieri:Is working with a merchant of record that has the bank accounts on your behalf.
Leo Tucker:Right. So you can go all in.
Sam Ranieri:You can go all in. Yeah. So getting involved in foreign exchange through a merchant of record really alleviates a lot of the burden and barrier to entry because that the merchant record like reach, we've already set all that up.
Leo Tucker:Right. So you can get into the game, take advantage of, you know, FX and the money left behind on the table if you're just farming it out, but not have to go in and develop an entire
Sam Ranieri:FX strategy internally. You got it. Yeah. There is there is a middle ground here, and it's through through someone like Reach. The one two punch here is is is is local acquiring and FX.
Sam Ranieri:Right? If we're getting to the meat and potatoes of what what this is is if you've got, again, you're localizing foreign exchange. It doesn't make sense not to localize your processing. You wanna localize them both. Right?
Sam Ranieri:And that's the key the key thing. So if you've localized your operations, right, again, either through yourself or through a merchant of record that already has it, but you can when you match your foreign your localized sort of, shopping experience, it's foreign exchange and processing. Right? So, again, you can, you know, do it on your own or you can outsource it to a merchant of record. Can you get too big for that?
Sam Ranieri:You know, we work with we can work with, you know, Fortune 500 companies, really, because it really comes down to what piece are you going to be using. Are you lose using the local acquiring piece? Are you using just the FX piece? Are you using just automated, FX API? And these are all tools that are all available out there in the marketplace.
Sam Ranieri:So it really comes down to the business. Right? Do I have enough bandwidth to handle this all on my own? I don't wanna outsource anything. Right?
Sam Ranieri:Or I'm so small that I don't really care, and I just wanna let someone else deal with it and just give me my US dollars at the end of the day. Small some money. And everything in the middle. Mhmm. Right?
Sam Ranieri:And it's just there's a lot of things you can, you know, us being, sort of finding an agnostic kind of, type of supplier where you can pick and choose the portions that you want to outsource and the portions that you wanna be involved in. Those are all available.
Leo Tucker:Right. And I suppose if you're large enough, you could handle the entire thing inside, and it's just a lot of work to do.
Sam Ranieri:So, you know, one once you're in control of it and you've got a really strong handle on what's important to you and how you're gonna use FX. There it opens up a lot of opportunity, and it it really comes down to what are you trying to do. Right? Are you are you trying to minimize the risk coming back to your company from foreign exchange, maximize profitability from foreign exchange coming back from to to to your company from foreign exchange, or are you trying to keep your products as cheap and cost effective as humanly possible in foreign markets using foreign exchange? So, you know, and you could solve all of them, but they're exactly.
Sam Ranieri:There's three different strategies. Right? And it's like, okay. If I'm gonna use FX to I want my product in The UK to be the cheapest product in The UK. I'm gonna try and use FX to do that.
Sam Ranieri:Well, you can, use go to multiple providers, get the lowest FX spread, like we're talking about spread. You can use, a a direct a f FX API that sends in a lowest spread rate in real time at the point of sale. You lock the spread. You get out of the market. That's the cheapest way you can do it.
Sam Ranieri:Right? That's one way. That's a that's a that's a strategy that can be adopted by again, your your main driver there is low cost, high sales. Right? You can That's one.
Sam Ranieri:Exactly. You can absolutely use FX to do that. Then there's marketing techniques. Right? And who likes paying shipping?
Sam Ranieri:Nope. Who likes paying duties and taxes? Not me. Nobody. So there's a marketing tactic where you could use foreign exchange to actually, you know I don't wanna say bury, but you can hide those costs offset.
Sam Ranieri:Yeah. Yeah. Well, not all set. You're you're hiding those costs. Because, basically, let's say let's just look at that from a practical example.
Sam Ranieri:You you have a you have a a product that's a hundred dollars plus $10 shipping plus, $7 tax. Right. So it's a hundred and $17. K? You can take your foreign exchange rate and mark it up by 17% and say free shipping, no tax.
Leo Tucker:No. There's your 17%. Got it. No shipping, no tax.
Sam Ranieri:Beautiful. So that's a marketing strategy that you can use. Right? And and then, you know, some it used to work a little bit more than before because I think people are sort of caught on to free shipping these days. But but, yeah, you can use foreign exchange, and that comes down to pricing strategies.
Sam Ranieri:And pricing strategies, you can just, you know, price your product whatever you want. But when you're not in control of foreign exchange, you're not in control of a very important aspect of that pricings of of how you're pricing. So working with foreign exchange to manipulate the cost in your cart to drive your strategy is Right. Very important.
Leo Tucker:Okay.
Sam Ranieri:Right? Otherwise, you're missing a very important piece to the entire puzzle. Excellent. So the third would be minimizing risk. And and really when it comes down to minimizing risk is using an FX API to lock the the trade at the point of sale.
Sam Ranieri:So, basically, the faster you get out of a trade in in foreign exchange, the less risk you're exposed to.
Leo Tucker:Right. You get a you get a rate, you see it, you trade it, you're done, boom. Exactly.
Sam Ranieri:And, airlines were good examples of this. They had flights that were constantly changing through algorithms, etcetera. Then you have the foreign exchange that was also moving. So you have too much variables in there that are constantly moving. So really, you know, airlines, they want they wanna get in and out of the foreign exchange market at the point of sale.
Sam Ranieri:Lock my ticket, lock my foreign exchange. I'd like to just lock my profits. That's minimizing risk to the fullest to the fullest extent. Right? And there are FX APIs available in the space, but it it has to be in combination with the bank accounts, with the treasury.
Sam Ranieri:Like, it's not just use this FX API and you're off to the races.
Leo Tucker:It's a strategy.
Sam Ranieri:It's a strategy. And it's it's all, you know, you'd have to work with someone that has all of the components sort of ready for you, or you have to go build out all the components.
Leo Tucker:Right. So we've talked about FX strategies can be simple, likely complicated. How can a company like Reach help?
Sam Ranieri:So, you know, this is our bread and butter. This is what we've done. We've mixed the best possible localization services all through one platform. Right? So it's basically, we've gone out, we've gotten all the bank accounts.
Sam Ranieri:Right? So we have bank account. We have 13 currencies that are supported by, the card networks in a like for like fashion. We've also got strategies in outside of the 13 main currencies, but we've got, live bank accounts ready to go. They're also attached to our entities as merchant of record.
Sam Ranieri:So you get the benefit of of of of MOR, merchant of record, through our entities. Then we bolt onto our FX API. So now, we're able to feed in the FX. It's all in one. Our automated treasury API will give you hedging strategies, pricing control.
Sam Ranieri:It gives you absolutely everything that you need to succeed and use at your discretion. You can use a piece of our API. You can use all of our API. Composable. Exactly.
Sam Ranieri:But when you're when you when you mix them together, right, and then you throw in sort of fraud and and and everything else that the reach platform does, you've sort of taken all of that complexity and and and and turned it into a very powerful tool for you to take advantage of of of everything that the global market has to offer while mitigating your risk.
Leo Tucker:I like that. Get into the game. Thanks, everybody, again, for another excellent episode of Business Over Borders. We look forward to seeing you next time. Don't forget to like and subscribe.
Leo Tucker:And if you're interested in seeing what we got coming next, hit that little bell. We'll let you know when our next episode comes out. Thanks. Brought to you by the reach network. Visit with reach.com/network for more.