This week Belgacom ICS and RBS announced that they have signed a memorandum of understanding for the facilitation of foreign currency exchange for mobile remittances. The MOU increases the flexibility in the Homesend international remittance product offered by Belgacom ICS. With RBS’s FXmicropay system provisioning wholesale FX rates to Belgacom, mobile operators now have the choice of whether to manage their own FX risk through the traditional roaming settlement clearing model or to benefit from RBS’s position as a market making bank with access to low FX rates.

How it works:

The interbank rate is the rate at which the largest international banks and security dealers trade currency pairs and is a closed rate not available to non-market making banks. When market making banks trade currency with non-market making banks, they do so at a rate that includes a premium that reflects their assessment of the market risk and a profit margin. Each ‘set of hands’ that separates the mobile operator from the original interbank rate applies their own premium. This model takes advantage of the fact that RBS is an interbank participating bank and so the FXmicropay system adds just one risk adjustment and profit margin and is therefore very competitive. Therefore Belgacom ICS can offer lower rates through the Homesend platform.