Wells Fargo Service Lets Small Banks Offer Online Foreign Exchange

Blending Internet technology with financial-services know-how, Wells Fargo & Co. has debuted a service allowing smaller banks under their own brand to offer foreign exchange services on their Web sites.

The service is an extension of Wells Fargo's existing Foreign Exchange Online, a real-time delivery system that can support a bank's foreign-payment and information needs via the Internet, including the ability to buy or sell currencies on a spot and forward basis, flexible reporting, and automated processing, the bank company said Thursday.

Customers of banks will be connected to Foreign Exchange Online via S1 Corp.'s Enterprise Platform, a popular online-banking software platform. Once there, they'll be able to initiate a variety of foreign-exchange transactions "that banks can't justify offering on their own because of the costly infrastructure that's required," says Gregg Napoli, senior VP of Wells Fargo Foreign Exchange Services. The $420 billion-asset Wells Fargo has had contract discussions with two such banks, he says.

The connection between the S1 platform and Foreign Exchange Online is provided by WellsXchange, a Web services-based system launched by Wells Fargo four years ago for conducting E-commerce transactions. Web services are software programs that let online apps communicate with each other.

Foreign Exchange Online is part of Commercial Electronic Office, a gateway to a host of commercial-banking services, including treasury, foreign exchange, brokerage, trust, electronic procurement, and credit and loan services. In four years, Commercial Electronic Office has grown to serve 60% of Wells Fargo's commercial customers. Last year, the portal processed nearly $6 trillion in online payments.

By building out Foreign Exchange Online to encompass smaller banks, Wells Fargo uses technology to fill a growing appetite for foreign-currency transactions. Free-trade pacts such as the North American Free Trade Agreement, as well as the introduction of the euro in 1999, have heightened demand among small businesses for foreign-exchange services. The growing number of foreign nationals living in the United States who look to send money to family members overseas also has spurred consumer demand.

Smaller banks, lacking the full-service capabilities of bigger banks, have traditionally satisfied this demand by forming correspondent banking relationships with the likes of Wells Fargo. Indeed, Wells Fargo last year extended Foreign Exchange Online to correspondent banks, letting them offer foreign-exchange services under their own private labels, with Wells Fargo providing back-office processing. Wells Fargo claims it's unique among banks offering similar private-label services in that its service is automated, eliminating all manual intervention. The deal with S1 allows those banks to include foreign-exchange services on their menu of online banking offerings.