Glossaire

A partially convertible currency is the monetary unit of a country where holders of the currency face legal constraints to convert it freely at the going exchange rate into other currencies. A currency is said to be partially convertible if one or more of the following three criteria about usability, exchangeability and market value are not fully enforced: it can be used for all purposes without restrictions; it can be exchanged for another currency without limitations; It can be exchanged at a given exchange rate.

Payment automation refers to a system for processing payments through software technology with minimal or no manual interaction.Payments Automation for International BusinessesInternational companies often rely on a global supply chain or have an extensive network of foreign suppliers. These practices may involve significant amounts of international payments, demanding a good deal of time and effort from the treasury department.In these cases, some companies implement technological tools to automate payment processing, minimising the workload of the treasury team and reducing human error.

A payment file or a ‘batch payment file’ is a document that specifies the details of each of the individual payments in a payment batch. A payment file contains all the information necessary to process a money transfer: the payer and beneficiaries’ account numbers, the amounts, pay-in and pay-out currencies, payment reference and other relevant comments. Companies with significant invoice processing activity tend to bundle payments to process them in batches in order to save time. The resulting payment file includes the details of all the invoices in the batch and is used by the bank or electronic payment provider to process all the transactions.

Payment netting is a procedure to settle transactions while minimising the need for funds to actually change hands. An asset manager may be ‘long’ Credit Default Swaps on Company A and ‘short’ on Company B. Instead of making payments for one position while receiving payments from the other, the payment can be ‘netted out’ to avoid unnecessary movements of funds.

The category of payments processing software includes an extensive range of systems that allow companies and individuals to send and receive payments automatically.Within payments processing software, there are two main groups: B2C and B2B payment solutions.B2C Payment processors are mainly payment gateways that allow merchants and e-commerce companies to process payments from their clients with different debit and credit cards and other types of internet transactions securely and in different currencies.B2B payment processing software refers to mass payments management solutions that help businesses to systematise, simplify and automate recurrent payments for partners and suppliers thereby reducing workload and minimising human error.

The category of payment reconciliation software comprises a wide range of technological solutions to automate bank and intercompany reconciliation processes, credit card matching and invoice-to‑PO matching in order to simplify payment reconciliation.It is impractical for e-commerce companies, marketplaces and, in general, businesses processing significant volumes of daily transactions manually, undertaking all the administrative tasks involved in reconciliation.These companies usually implement payment reconciliation software solutions, like Kantox currency accounts, to improve process efficiency. Currency accounts allow these businesses to maintain a very cost-efficient structure of multiple account numbers to channel payments from different customers or in different currencies.

A pegged exchange rate, also known as a fixed exchange rate, is a currency regime in which the country’s currency is tied to another currency, usually USD or EUR. The purpose of a pegged exchange rate is to stabilise the value of the local currency, keeping it at a fixed rate in order to avoid exchange rate fluctuations. A country may decide to stabilise its exchange rate through a pegged exchange rate to prevent an excess of under- or over-valuation. Such arrangements can work well for some time, especially if the country that applies it is seen as credible by foreign exchange markets participants. Sooner or later, however, differences between the currencies concerned —due to inflation rates, productivity levels or other factors— are bound to create uncertainty about the peg, which (paradoxically) could lead to even more exchange rate instability over the medium- to long term.

Plain vanilla is a term used to describe a financial instrument with no unusual features. The simplest forward, options and swap contracts are all examples of plain vanilla financial instruments. Thanks to their simplicity, they are generally cheaper than non-plain vanilla products. Plain vanilla forward contracts, such as Outright Forwards and Open Forwards are the most widely used instrument in Currency Management Automation solutions. This is because, unlike complex financial instruments designed for special situations, plain vanilla currency forwards answer most of the day-to-day FX risk management needs of companies.

Les points forward reflètent les écarts de taux d’intérêt entre deux devises dans un contrat forward (contrat à terme) qui est un accord permettant de compenser le risque de taux de change.

Dans les contrats forward, les points forward sont les points de base qui sont déduits ou ajoutés au taux spot (taux actuel) afin de définir le taux exact de l’opération forward.

Les facteurs ayant une incidence sur le taux forward sont le délai indiqué entre le spot et le forward et les taux d’intérêt. Les points forward sont calculés en fonction de la différence des taux d’intérêt entre les deux devises négociées dans l’opération forward à l’expiration du contrat.

La devise la plus rentable génère des points forward négatifs et la devise la moins rentable génère des points forward positifs.

Pre-transaction risk comprises the firm’s operational and currency risk before a transaction is committed. From the operational point of view, pre-transaction risk starts with the process of collecting and monitoring the firm’s FX exposure. Is the process of collection exposure timely, relevant and accurate? Are currency markets monitored with manual or automated processes? In terms of currency risk, pre-transaction risk, also known as pricing risk, refers to possible exchange rate fluctuations between the moment a company prices a transaction and the moment it is formally agreed. It is especially prevalent in industries that operate with framework contracts like the specialty chemicals industry. Pricing risk, in this case, starts when FX-denominated inventory is purchased and continues until the corresponding sales transaction is agreed.

The presentation currency is the monetary unit used by a firm to record its transactions and to present its financial statements. The presentation currency is also known as the reporting currency or accounting currency. In most cases, the presentation currency is also the firm’s ‘functional currency’, i.e. the currency in which it primarily generates and expends its cash. A company can decide to present its financial statements in a currency different from its functional currency, for example when preparing a consolidated report for its parent in a foreign country. While a company can choose its presentation currency, it cannot change its functional currency.