Hubpay, the leading fintech company specializing in digital foreign exchange (FX) solutions has launched the UAE’s first fully automated hedging platform that will minimize SMEs exposure to currency fluctuations.
The foreign exchange market (FX) in the UAE currently exceeds $1 Trillion and plays a crucial role in the economy and region’s positioning as a global trade hub. Processing over $2.2 bn of transaction volume to date, Hubpay has introduced its new Forwards Contract service to mitigate financial risk for businesses that buy or sell products and services internationally by introducing a fully automated service on all deliverable currencies 24/5.
Helping SMEs Improve Cash Flow with Forward Contracts
SMEs often face significant challenges managing cash flow, with research showing that nearly 60% of small businesses experience cash flow issues at some point in their operations. To address this, Hubpay is offering flexible forward contracts that allow SMEs to lock in future exchange rates with just a 5% deposit of the overall notional value.
By using forward contracts, SMEs can hedge against currency fluctuations, ensuring predictability in their foreign exchange transactions and preserving essential cash flow. This strategy helps businesses avoid unexpected exchange rate spikes, enabling them to allocate more working capital towards growth and daily operations.
How Hubpay’s Forward Contracts Can Protect a UAE SME
Japan is a key trading partner for the UAE, with bilateral trade volumes exceeding 20 billion USD in the past 10 months. However, the Japanese Yen has seen a volatility of 12% 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% 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” explains Kevin Kilty, CEO and Founder 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.”
Building a World-Class Payment Platform for Businesses
Hubpay’s open forwards platform represents another significant step towards building a world-class FX and payment platform for businesses in the UAE and beyond. This innovative solution empowers companies to thrive in a dynamic and global economy, mitigating risk and securing their profit margins and financial future.
