Hubpay, a fintech specialising in digital foreign exchange (FX) solutions, has launched the UAE’s first fully automated hedging platform, in a move to minimise SMEs’ exposure to currency fluctuations.
With as much as 60 per cent of small businesses experiencing cash flow issues at some point in their operations, the new Hubpay forward contract FX service from Hubpay enables SMEs to lock in future exchange rates with just a five per cent deposit of the overall notional value.
The FX market in the UAE currently exceeds $1trillion and plays a crucial role in the economy and region’s positioning as a global trade hub. Processing over $2.2billion of transaction volume to date, Hubpay’s new service mitigates financial risk for businesses that buy or sell products and services internationally by introducing a fully automated service on all deliverable currencies 24/5.
By using forward contracts, SMEs can hedge against currency fluctuations, ensuring predictability in their foreign exchange transactions and preserving essential cash flow. This strategy aims to help businesses avoid unexpected exchange rate spikes, enabling them to allocate more working capital towards growth and daily operations.
Helping businesses plan ahead and secure themselves
Japan is a key trading partner for the UAE, with bilateral trade volumes exceeding $20billion in the past 10 months. However, the Japanese Yen has seen a volatility of 12 per cent during the same period. This presents a challenge for UAE businesses that import or export from Japan.
In July, a UAE-based SME placed an order for goods from Japan, with payment due in October. Over this period, the currency market shifted by 7.8 per cent against the UAE business, significantly increasing the cost of the goods. Originally budgeting $500,000, the business is now facing an additional $39,000 in currency costs, potentially eroding their profit margin.
“Had the business secured part of its exposure with a flexible forward contract through Hubpay, they could have locked in an exchange rate in July, protecting against market volatility and ensuring cost certainty,” explained Kevin Kilty, founder and CEO of Hubpay. “This approach would have allowed the business to manage its cash flow more effectively and safeguard its profit margins during volatile market conditions.”
Hubpay explained that its open forwards platform represents another significant step towards building a world-class FX and payment platform for businesses in the UAE and beyond. This solution also enables companies to mitigate risk and secure their profit margins and financial future.