FX Modernization for Banks: How to Stop Revenue Leakage and Grow Non-Interest Income

Every bank wants more fee income. Few realize they’re already giving some of it away.

Consider a typical commercial customer. They keep deposits at the bank, use treasury services, and rely on the institution for credit. But when they need to pay a supplier overseas, receive funds from a customer abroad, or manage foreign currency exposure, they often leave the banking relationship and turn to a correspondent, fintech, or specialty provider. The transaction gets completed, but the revenue often goes elsewhere.

That was one of the central themes explored during a recent American Banker webinar sponsored by Finzly. Despite growing demand for international banking services, nearly half of institutions surveyed still rely entirely on correspondent banks for FX services or do not offer FX capabilities at all.

The opportunity may already be in your portfolio

One of the more interesting insights from the webinar was that banks frequently underestimate how much international activity already exists within their customer base. Businesses are buying inventory from overseas suppliers, selling into foreign markets, and making cross-border payments every day. The challenge is that many banks don’t see this activity because customers have found alternative ways to manage it.

That’s what makes FX different from many growth initiatives. Banks don’t necessarily need new customers. They need a better view of the customers they already have.

Panelists noted that roughly 85% of international banking revenue growth during the first two years came from existing customers rather than new client acquisition.

The opportunity wasn’t created through a sales campaign. It was uncovered through a better understanding of customer payment behavior and treasury needs. Whether it’s outbound international wires, payments flowing to fintech providers, or treasury discussions that uncover overseas suppliers and customers, the signals are often hiding in plain sight.

More banks are taking ownership of the FX relationship

Historically, correspondent providers offered banks an efficient way to provide foreign exchange services without significant investment. For many institutions, that model still plays an important role. But as international payment volumes grow and customer expectations evolve, more banks are evaluating how much of the FX relationship they want to own.

According to webinar polling, 75% of participating institutions plan to build, expand, or deepen their FX capabilities within the next 12 to 24 months.

Part of that urgency stems from competition. Fintechs have shown that businesses want fast, transparent, and integrated cross-border payment experiences. But they have also highlighted a broader truth: foreign exchange is not simply a transaction service. It is part of the customer relationship.

Banks already have advantages fintechs struggle to replicate. They hold the deposits, provide credit, manage treasury services, and understand the broader financial needs of their customers. The opportunity is not necessarily to become an FX dealer. It is to ensure that international payments and foreign exchange remain part of the overall banking relationship.

What bank leaders should take away

For bank executives, FX modernization is about relationship ownership. Customers are already making international payments. They’re already managing currency exposure. They’re already paying for FX services. The question is whether those activities happen inside the banking relationship or outside of it.

For banks looking to grow non-interest income, deepen commercial relationships, and remain competitive in an increasingly global economy, FX may be one of the largest opportunities already sitting inside the portfolio.

Capture more FX revenue from the customers you already serve. Talk with our FX experts to learn how.