Glosario

Fintech es un término formado por los vocablos ingleses “finance” y “technology”; tecnología y finanzas. Se aplica a aquellas empresas del sector financiero que se sirven de las últimas tecnologías para ofrecer productos y servicios pioneros e innovadores.

El concepto fintech ha adquirido gran relevancia en los últimos años y sus representantes han crecido exponencialmente, tanto en número como en cuota de mercado. Por ejemplo, la inversión global en empresas fintech se cuadruplicó desde los 3 millones de dólares en 2013 hasta los 12 millones en 2014.

La diversidad de servicios financieros que ofrecen las empresas fintech es amplia y se ha extendido con rapidez, desde los servicios de crédito hasta transferencias, gestión de inversiones y de capital.

Uno de los elementos característicos de las empresas fintech genuinas es la transparencia, a través de la cual buscan alterar el statu quo de un sector dominado por organizaciones tradicionales y en la mayor parte de los casos, de bajo desarrollo tecnológico.

El fuerte avance que ha experimentado el sector fintech y su crecimiento dentro del sector financiero tradicional tiene su raíz en los rápidos avances tecnológicos que han hecho posible esta innovación, pero no exclusivamente en este punto.

La crisis financiera global del 2007-09 ha tenido gran parte de la responsabilidad del crecimiento del sector fintech, principalmente debido a la restricción del crédito, que obligó a empresas y particulares a buscar vías alternativas de financiación, lo que contribuyó a crear uno de los servicios destacados de la industria fintech.

Estos son los principales servicios que ofrece el sector:

1. Transferencias de dinero
2. Financiación de capital
3. Créditos peer-to-peer
4. Tecnología móvil de pagos
5. Plataformas de trading e inversión

Hoy en día están surgiendo asociaciones de empresas fintech en los países en los que más desarrollado está el sector, con la finalidad de impulsar la inversión y la popularidad de sus servicios.

Fintech companies provide financial services using technological innovation. The rise of Fintech was made possible by the convergence of technological development and changes in financial regulation.Fintech companies essentially offer alternatives to traditional banking in services such as equity funding, lending, payments and foreign currency trading. What sets these new companies apart is their use of technologically sophisticated methods and an approach focused on the client, rather than on short-term profit.With that philosophy, the Fintech industry is challenging the traditional finance sector, which has long been dominated by banks, followed by brokers, wealth management firms, asset portfolio management firms and financial advisors.

A flexible forward contract, also known as an open forward contract, is a contractual agreement to buy or sell a specified amount of one currency against payment in another currency on or before a specified date in the future known as the ‘value date’. By contrast, when both parties are legally obliged to exchange the funds on the value date, the forward contract is said to be ‘fixed’, ‘closed’ or ‘standard’. In a flexible forward contract, the funds can be exchanged in one go (“outright”). Alternatively, several payments may be made over the course of the contract provided that the entire amount is settled by the maturity date. For example, a US company knows it will have to pay a number of invoices from a supplier based in the Eurozone during next year. I can decide to purchase a 12-month open USD-EUR forward contract, allowing it to make drawdowns to pay the supplier in euros, as and when necessary, over the course of the year.

A flexible hedging strategy or program is the hedging of future FX-denominated cash flows that result from contractually binding transactions, whether or not the corresponding receivables/payables have been created. In a flexible hedging program, forwards are booked against SO/POs (sales orders/purchase orders) and/or AR/AP (accounts receivable/accounts payable). Flexible hedging strategies or programs call for constant vigilance, as new orders keep on arriving. Their effective implementation is carried out with the help of Currency Management Automation solutions that provide end-to-end automation. On the opposite side of the spectrum, static hedging —where a big hedge is taken at the start of the period and is not reactivated until this period is over— is implemented once. Flexible hedging strategies or programs are particularly well suited for companies with low forecast accuracy where an FX rate is systematically part of its pricing parameters. Whether their pricing is frequently updated (bed banks in the travel industry) or not (ecommerce companies), these firms are mostly compelled to hedge on a transaction-by-transaction basis.

A floating exchange rate regime lets currencies find their level in the foreign exchange market. Contrary to a fixed exchange rate regime, where a currency is pegged to another at a fixed rate, exchange rates in a floating exchange rate regime are determined by the interplay of supply and demand. The current floating exchange rate regime has been in place since the 1970s. Some governments intervene, through their central banks, to manage the value of their currency relative to others in order to avoid losing competitiveness. China’s exchange rate regime, for example, has undergone gradual reform since the move away from a fixed exchange rate in 2005. The renminbi has become more flexible over time but is still carefully managed, and depth and liquidity in the onshore FX market is relatively low compared to other countries with floating exchange rates. Gradually, China is allowing a greater role for market forces within the existing regime, and greater two-way flexibility of the exchange rate.

Foreign currency measurement is the accounting method used by an organisation to measure foreign transactions in their functional currency.International businesses that pay suppliers in foreign currencies and/or sell their products in overseas markets need to translate those costs and revenues into their functional currency in their financial statements.Since currencies fluctuate continuously, these companies are subject to transaction risks. The variations of the exchange rate in the different moments when foreign currencies are exchanged, generate differences in the amount of functional currency needed to pay suppliers (in the case of costs) or received from sales in overseas markets. These differentials are called transaction gains and losses and are included in the company's net income statements.

Foreign currency monetary items are FX-denominated assets and liabilities representing a claim to receive, or an obligation to pay, a fixed amount of foreign currency units. Examples of foreign currency monetary items are FX-denominated cash positions, accounts payable and receivable, and long-term debt. By contrast, non-monetary foreign currency items include inventory, fixed assets and long-term investments. The distinction between foreign currency monetary and non-monetary items is relevant in terms of the different techniques used in FX translation methods. With the monetary/nonmonetary method, monetary items such as cash, accounts receivable and payable, are translated at the current exchange rate, while nonmonetary items (inventory, fixed assets) are translated at the historical exchange rate.

A foreign currency option is a financial derivative instrument that gives the buyer the right —but not the obligation — to buy (in a ‘call’ option), or to sell (in a ‘put’ option) the contracted currency at a set price or exchange rate (known as the ‘strike price’), on a predetermined expiration date. The seller of the option must fulfill the contract if the buyer so desires. Because the foreign currency option has value, the buyer must pay the seller a premium in exchange for the right to exercise the option. An ‘American’ call or put option can be exercised at any time up to the expiration date; a ‘European’ option can be exercised only at maturity. When hedging regular foreign currency inflows and outflows, forward contracts are more widely used than foreign currency options. However, foreign currency options can be an efficient tool when contingent business events are hedged.

Foreign currency remeasurement is a procedure that restates the value of payables, receivables, and cash balances posted in a foreign currency to the company currency at period end. The key day for foreign currency remeasurement is the last day of the period or fiscal year. Items are valued using the exchange rate valid on the key date and compared to the amounts that were originally posted.

Foreign currency revaluation is a treasury concept defining the method by which international businesses translate the value of all their foreign currency-denominated open accounts – i.e. payable and receivable transactions – into the company's reporting currency.The challenges of Foreign currency revaluationAccounting regulations require international businesses to keep an updated record of the value of all open transactions in their reporting currency. In the case of payables and receivables due to be settled in foreign currency, these are subject to transaction risk, which refers to the adverse impact that movements in the exchange rate could have on the companies' account books.The company runs a foreign currency revaluation process to solve this issue. At the end of each accounting period, the value of all open transactions is translated into the reporting currency using the current spot exchange rate. These revaluations generate differences in the value of the company's monetary assets and liabilities, which get recorded under "unrealised gains and losses".When the transaction is settled, the differences in value between the firm sale or purchase commitment and the payment date are recorded as realised FX gains/losses on the balance sheet.

Foreign currency risk or foreign exchange rate risk, also known as exchange rate risk, is the possibility that currency fluctuations can affect a firm’s expected future operating cash flows, i.e., its future revenues and costs. Exchange rate risk affects all companies with international operations. For companies desiring to take advantage of the growth opportunities from buying and selling in multiple currencies, effectively managing currency risk is an essential task. Foreign currency risk can be decomposed into: Pricing risk, between the moment a transaction is priced and settled Transaction risk, between the moment a transaction is agreed and settled Accounting risk, between the moment the invoice is created and settled The most effective tool to manage foreign currency risk is to deploy FX hedging programs —and combinations of hedging programs — that allow management to achieve the firm’s goals in a systematic way, meaning: (a) targets must be consistently accomplished over time; (b) the goals of the program must be clearly communicated across the enterprise in as much detail as possible.

Foreign currency risk management is the process that allows firms to protect themselves from currency risk. This allows them to take control of their own competitiveness by capturing the growth opportunities resulting from buying and selling in multiple currencies. With FX risk under control, managers can focus on growing the business. Foreign currency risk management relies on a variety of hedging programs and combination of programs. The details of each program vary according to the pricing dynamics, the weight of FX in the business, the location of competitors, and the situation in terms of forward points. Implemented by means of Currency Management Automation solutions, foreign currency risk management programs also take into account the company’s sources of information, IT systems, degree of cash flow visibility, and key decision makers (their risk tolerance, their familiarity with different risk management styles, etc.).