Incremental Fee Revenue Generation

 

The DFX business model is entirely transaction-based, and the bank's fee is "booked" as revenue on the day of the transaction.

 

• DFX populates the system with transactional rates on a daily and intra-day basis as they are received from the third-party vendors.

 

• DFX has contracts with each of the vendors under which the vendors agree to provide rates at which they will execute transactions. Transaction rates are valid for 24 hours for currency products, and wire transfer rates are reset hourly intra-day. All rates could, of course, be reset more frequently in highly volatile market environments.

 

• The transactional rates displayed by DFX include the bank's own service fees, margins set by the third-party vendor, and DFX transaction fees. DFX enables a bank to set its own transaction mark-up, and it offers banks the flexibility to adjust the fees they charge based on the size of transaction, the nature of the client relationship, intraday adjustments and other factors.

 

Bank clients access the DFX system and place their orders through their bank's web site. The bank receives its fees daily, directly debiting its clients' accounts as each transaction is booked. At the close of business, the bank then pays the third-party vendors the net settlement for the day's transactions, usually by crediting an ACH account with the vendors.

 

Incremental Fee Revenue Example

 

DFX offers regional and smaller banks the opportunity to capture a significant fee-based revenue stream that is currently being surrendered to competing institutions or to third-party vendors to which they are referring depositors with no compensation in return.

How significant is the revenue opportunity? Assume, for example, that a 20-branch bank sets its transaction mark-up at 150 basis points (bps) and that each day it has four commercial wire transfer or draft transactions of $80,000 each and one retail currency transaction of $1,000 aggregated across its 20 branches.

 

The net fee-based revenue would be:

• Daily: $4,815.00
• Annually: $1,203,750

 

To be conservative, the revenue figures in this example are based on 250 days a year even though DFX service availability is 24/7/365. Actual average wire transfer size is $100,000, and the average currency transaction is $1,300 per individual travelling and we are assuming only a purchase for a single traveler rather than a couple or family.

 

Contact us for more information or to set up a live demo of our foreign exchange software