Have you ever stopped to consider the downsides of the rapid move to online systems for everything we do? When was the last time you negotiated with a computer? Are you aware that your computer is negotiating with you?
As a treasurer, I genuinely believed that a key part of my reason for being was to stop as many financial “leaks” as I had control over. It was for this reason margins we paid on financial products were something that I always kept a keen eye on. This was also the reason that I preferred to speak to my banking counterparts rather than transact exclusively online. I’m far from a luddite, so why would this be so?
These days it is important to understand that not all is as it seems online. The data that you are generating as you work your way across the internet is being used against you in ways that you may not be aware of. Probably one of the most sophisticated industries in this regard is travel. As you search, the data on the location and dates you are seeking will be added to psychological triggers to try to get you to pull the trigger paying the highest price they can get you to agree to. You just lost the negotiation.
As FX transactions have moved online I believe the reasons for transacting offline have actually increased, at least some of the time. Following are the main reasons for picking up the phone to talk to a human as a part of your FX risk management routine:
- There must be a survivor bias on dealing desks. If someone has managed to not be replaced by a machine, it should be the case that they could provide you some actual insight. Best of all, when you seek human advice, at the moment that advice is being subsidised by those who don’t seek it as the banks do not charge by interaction.
- If you only transact online then while the computer may be negotiating with you, you have no way of engaging in the negotiation. The banks invest an enormous amount of money in data analysis, with the primary goal of making more money (which means you make less). It is more than possible that there is a human on the other side of the computer watching you hit the “reprice” button and pushing the price away from the target you are looking for. At some point your psychology is going to make you hit the “buy/sell” button. In the future, it will be data-driven algorithms that do this – they will be more ruthless than a human.
- “We’ve stripped out a whole bunch of costs, so we’re going to flow some of that benefit back to you in the form of a discount,” said no bank, ever. You can’t negotiate with a machine, but you can negotiate with a person – but if you don’t ask, you don’t get. This will result in lower costs for your risk management program.
- When you have a large or unusual or complex transaction to complete, you will have a relationship with someone who can help you execute it.
So while the world is quickly moving online, there are compelling reasons for conducting at least some of your transactions over the phone. If you’d like to benchmark your FX costs to ensure consistency whether you’re transacting online or over the phone, sign up now for your 30 day free trial.