A spokesperson for American Express (Amex) said: investor daily The company will “discontinue” offering Foreign Exchange International Payments (FXIP) for the “majority of customers” by the end of 2023.
Accordingly, the company will no longer provide foreign exchange services to corporate customers outside the United States.
“We will be reaching out to our customers in Australia to guide them through the local impact of these changes and to provide support as they transition to alternative providers,” the spokesperson said.
The company said it will continue to process AccessLine payments to domestic suppliers “for now,” while evaluating the product.
FXIP’s closure is expected to affect the Australian workforce, with the curtailment process beginning this year.
The company declined to comment on the scale of the job cuts, but said some employees could be reassigned to other positions at the company.
Amex’s decision follows significant foreign exchange volatility on the back of aggressive monetary policy tightening by global central banks.
The US Federal Reserve has raised interest rates by a cumulative 500 bps since it began its tightening cycle in early 2022, and recently implemented a 25 bps hike to raise the interest rate to 5-5.25% Did.
In its 2022 annual report, Amex flagged the risk of rising interest rates to its FXIP earnings, stating that “adverse currency fluctuations and foreign exchange controls” would “reduce earnings from international operations and impact capital.” ” warned of the possibility.
However, the company did not hint at a major overhaul of its FXIP strategy, but said it would explore options to soften the blow.
“We aim to minimize market risk from these activities by hedging and setting limits where appropriate,” Amex said.
“…the actual impact of changes in interest rates and foreign exchange rates will depend, among other factors, on the timing of the rate change, the extent to which different interest rates do not move in the same direction or in the same direction to the same extent. Changes in cost, volume and mix, and changes in volume and mix of business.”
In 2022, approximately 22% of Amex’s total revenue (excluding interest expense) was generated through operations outside the United States.
“We are exposed to foreign exchange risk from our international operations and, therefore, the revenue we generate outside the United States may be subject to unpredictable fluctuations when the value of other currencies changes against the US dollar. Yes, Amex said in its annual report:
Regulatory impact
Amex also pointed to revenue risks related to government regulation and capital controls, noting Australia’s focus on interchange fees and “the rules, terms and practices governing merchant card acceptance”. Did.
“Regulations and other governmental actions regarding pricing and practices may directly or indirectly affect all networks, as well as adversely affect consumers and merchants,” Amex said. I’m here.
In his keynote speech at the Australian Payments Networks Summit in December 2022, Reserve Bank of Australia (RBA) Governor Philip Lowe said Australia would make cross-border payments “cheaper, faster, more transparent and more efficient. It said it had to “play its part” in order to “do it in many ways.” accessible”.
“The cost of international payments is too high,” he said.
“…We are seeing progress in this area, but it is slow.
“In part, this progress has been driven by increased competition, with many cheaper non-bank digital money transfer operators entering the market and pushing costs down.”
Governor Lowe noted greater transparency through the use of an online calculator that reveals the total cost of international payments “including all fees and FX markups.”
“We still have a lot of work to do here and we need the support of Australian financial institutions to make further improvements,” he said.
