Monday, 16 October 2017

Flight Centre Travel Group: Simplifying payments, maximising FX efficiencies

A highly diversified global business, Flight Centre Travel Group (FCTG) found their cross-border supplier payments process to be increasingly less efficient as they continued growing their supplier base and expanding into new markets and channels.

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With several banking relationships and payment service providers in countries around the world and a high volume of small-value payments, FCTG was looking to simplify global supplier payments significantly while also minimising cross-border service fees. Following a competitive tender process, FCTG appointed the HSBC team in Brisbane to leverage the strength of their existing relationship.

About Flight Centre Travel Group

Founded in the early 1980s, FCTG has grown to become one of the world's largest travel agency groups with AUD20 billion total transaction value across more than 40 brands and 20,000 employees operating in over 20 countries together with a corporate travel management network that reaches across 90+ countries.1

What began as a single shop more than three decades ago has grown into a global enterprise across leisure, corporate and wholesale businesses around the world.

It got to the point that managing supplier payments was just too cumbersome using the existing payment service providers and processes. We knew we needed a more efficient global payments process and a solution that would also enhance transparency across banking and treasury operations.

According to Richard Humphreys, FCTG Global Treasurer, the company's successful evolution is due in part to its focus on achieving consistent growth over time. "We've achieved our goal by focusing on diversification," says Mr. Humphreys. "With both an online and bricks and mortar presence, we have moved away from being solely an Australian-based retail travel provider to offer corporate, wholesale, leisure services globally as well as in-country experiences."

The Business Challenge

The result has been significant growth and a strong balance sheet, both of which contributed to FCTG coming through the global financial crisis with very little negative impact. At the same time, however, their ongoing development gave rise to inefficiencies and risks – particularly in supplier payments processes. "As we expanded, we opened or inherited a number of bank accounts in various countries around the world to manage our local transactions," Mr. Humphreys explains. "When we made an acquisition giving us access to a wholesale travel system, we took that opportunity to begin centralising contract management in Australia with hubs in South Africa, the UK and the US."

The company followed by centralising all wholesale payments and FX exposures in one place, effectively consolidating FX inflows and outflows to make it easier to hedge on a global basis. As FCTG continued to grow, however, the team found it was making an ever-increasing number of small payments to suppliers in different countries and currencies using expensive, and error-prone cross-border payment mechanisms. It got to the point, Mr. Humphreys says, that managing supplier payments was just too cumbersome using the existing payment service providers and processes. "We knew we needed a more efficient global payments process and a solution that would also enhance transparency across banking and treasury operations."

HSBC is an ideal partner for us because of their global footprint. They can easily handle large volumes of small-value payments to different locations around the world.

What FCTG was looking for was a banking partner with global expertise and a significant local branch presence in their key markets around the world as well as demonstrated financial strength and stability. FCTG Treasury conducted a competitive tender to evaluate the options and consider potential solutions.

HSBC's Solution

FCTG had been working with HSBC for close to a decade at this point and was delighted with the solutions presented by the HSBC Brisbane relationship team during the tender. As a result, FCTG started working with HSBC to:

  • Simplify global payments and minimise cross-border banking fees via direct access to domestic clearing systems
  • Categorise and post payments and collections to the appropriate business streams
  • Integrate information into FCTG systems to facilitate beneficiary management, cash management and reporting

HSBC began by suggesting Global Disbursements as part of an overall Global Payment Solution. Global Disbursements aligns with FCTG's centralisation strategy by allowing the company to make cross-border payments using one funding account (or just a few, depending on the individual business), one remittance file and one debit entry2 for payments distributed globally in multiple different currencies. Initiated via HSBCnet, Global Disbursements gives FCTG the ability to make multiple small payments in more than 130 currencies seamlessly with:

  • Improved efficiency through simplified payments processes and streamlined reconciliation for better overall cash management
  • Reduced transaction costs by utilising in country accounts in order to make payments via local channels as opposed to International payments and eliminating expenses associated with multiple currency accounts
  • Enhanced transparency around reporting and payment status to provide greater control over payment flows
  • Centrally negotiated FX rates for transparency and improved commercials for operating businesses

Managing local requirements in different jurisdictions within a global framework is always challenging. That's where HSBC's local relationships and knowledge come into play. We know we can enter new markets with confidence.

The Result

Mr. Humphreys and Scott Reid, Assistant Treasurer for FCTG, both agree that the greatest benefit of HSBC's programme is the ability to use a single connection – HSBCnet – and one Global Payments Solution, which includes Global Disbursements, for access to local clearing systems in multiple markets.

"HSBC is an ideal partner for us because of their global footprint," says Mr. Humphreys. "They can easily handle large volumes of small-value payments to different locations around the world. Since all our businesses across the group can load payments into the Global Disbursements engine, HSBC helps us manage the process in a highly efficient and cost-effective manner."

Having a truly international bank as a partner is key, says Mr. Reid. "Managing local requirements in different jurisdictions within a global framework is always challenging. That's where HSBC's local relationships and knowledge come into play. We know we can enter new markets with confidence."

1 Source: FCTG, data as at August 2017

2 One debit entry per batch or remittance file.

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