StoneX Financial GmbH (Company) a wholly owned subsidiary of StoneX Group Inc. With the development of the Latam market and Brazil, it was natural for StoneX to have its own local infrastructure to compete on the FX market. In 2014, Fernando Mazzanti implemented

a business plan for a broker-dealer in Brazil and, after 4 years, the Central Bank granted an FX Bank license, taking StoneX to another level of capability. exchange rate. 2019 marked Fernando's return to Brazil to lead this on-site business.

Mr. Mazzanti, can you tell us about the history of StoneX Banco de Cambio and your FX operations in Brazil?

StoneX Group Inc. (previously known as INTL FCStone Inc.) began operating in Brazil in 2005. Since then, the company has established itself as a pioneer in providing risk management services to the Brazilian agribusiness industry. In 2014, we began providing foreign exchange services in Brazil, initially to meet the payment needs of our own global payments platform. In April 2018, StoneX Global Payments became one of the few foreign firms to achieve licensure to operate as an FX bank from the Brazilian government. We now have branches in São Paulo, Campinas and Porto Alegre to help companies make and receive payments from abroad in a fast and efficient way. We are able to meet a full range of client needs – from just a spot exchange remittance, in any currency and amount, to more complex transactions – thanks to our ability to provide clients with transparency and control over the payments process.

Processing payment flows in the Brazilian Real (BRL) across borders can be a complex process. How does StoneX help its clients succeed?

Few functions create more headaches for corporate controllers and other accounting professionals than the transfer of funds in and out of countries that have non-convertible currencies such as the Real. Thousands of companies with headquarters outside of Brazil regularly grapple with this challenge, given the country’s position in the global commodities space as a major producer and exporter. Moreover, recent demographic trends and forecasting, alongside the rise of the digital economy, suggest that transaction flows in BRL will continue to increase substantially for companies across the globe. Success in this jurisdiction will hinge on fast, efficient, and predictable two-way flows between offshore headquarters and their Brazilian operations. Prior to our setting up the FX bank, the payments process into and out of Brazil was the opposite of fast, efficient and predicable. We had to reach out to different local banks individually and secure the appropriate exchange terms needed to settle transactions into Brazil from offshore locations. It was becoming increasingly difficult for us to provide: 1) consistent, affordable FX rates; 2) predictability and transparency in process; and 3) documentation where the cost on both sides of the transaction matched precisely. Today, INTL FCStone Banco de Cambio S.A facilitates both inbound and outbound services in the BRL, effectively taking care of the whole process for clients while providing a high level of service.

What were the main challenges that you overcame to build up the infrastructure required to provide these services successfully?

Our initial challenged involved securing regulatory approval from the Brazilian government to operate as an FX bank here. This process required four years of close cooperation with local regulators before culminating successfully in April 2018 with us achieving all of the approvals and licensure needed. Our second challenge was to convince businesses that our new service offered a better alternative to their existing process. Whilst inbound business experienced a significant uptick due to the advantages offered through the new FX bank, outbound flows did not. The division quickly realised that several existing fears on the part of financial controllers were blocking the materialization of such new business. These concerns included: Fear of Change – financial controllers were often reliant on the use of NDFs (non-deliverable forwards) to complete their hard currency conversions. We needed to convince institutions of the benefits of managing their flows in BRL, the local unit, through our service.

Fear of Red Tape – the onboarding process for clients in today’s highly regulated environment remains significant given the levels of due diligence required. It was imperative to explain that the group’s one-time onboarding process had several advantages that outweighed a treasurer’s reluctance to complete an onboarding. Chief among these: a single registration would eliminate repetitive documentation issues and inconsistencies inherent to transacting in NDFs. Fear of the Unknown – StoneX simply did not have the same reputation or brand recognition enjoyed by many of the global banks operating in Brazil.

In practice, didn't StoneX have the same reputation as many of the global banks operating in Brazil?

Exactly. The group needed a large international company with a significant onshore presence and business requirements in Brazil to start utilising our services and thus, provide the proof of concept and execution required by the marketplace. Fortunately, one of our major banking customers recommended our services to a client of theirs, as we filled the exact needs that their alternative providers had been unable to satisfy. These included FX rate consistency, process standardization, and documentation and figure reporting that mirrored headquarters’ books.

What impact has the COVID-19 pandemic had on your operations? Within this context, what role has digitalisation played in ensuring a smooth payments process?

Unlike for many companies, our flows have actually increased considerably during the pandemic. Last year, we processed more than $1B in volume, which was an increase of more than 20% from the previous year. These results suggest to us that the significant investments in technology systems and platforms we made were well allocated – not just in the context of COVID-19’s limitations but also going forward. Our web-based, digitalized global payments platform enables our clients to complete their FX transactions electronically in real time, whether from the office, home or elsewhere, and without the additional steps of needing to contact us by phone or message to close their transactions. In fact, prior to the onset of the pandemic, our first priority following our regulatory approval was to launch our web-based user interface and our online portal for completing the due diligence, KYC requirements, and onboarding processes digitally. This added further value to our process and allowed us to build even stronger relationships with clients - even in the midst of the pandemic.

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