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eFX

The term eFX, or Electronic Foreign Exchange, refers to the automation of FX operations through platforms and application programming interfaces (APIs). In Brazil, the concept was formally structured by the Central Bank (BCB) through the figure of the eFX service provider, consolidating a model where technology replaces the need for manual interaction with bank trading desks.

Instead of a company contacting a bank by phone or email to quote and close an operation, its own software system connects directly to an authorized platform.

The regulatory FX framework (BCB Resolution No. 137/2021) established that institutions authorized by the BCB can act as "eFX service providers". These institutions—which can be banks, brokers, or even fintechs that obtain the appropriate license—offer their clients (companies, fintechs, etc.) access to quotes and the execution of FX operations electronically and in an integrated manner. The main feature is the ability to process a high volume of low-value transactions efficiently, something unfeasible in the traditional model.

Operational Model

The operation of eFX is based on system integration, typically through the steps below:

  1. API Integration: The client company integrates its system (ERP, payment platform, app) with the eFX provider's API.

  2. Request for Quote (RFQ): When an FX operation is needed—for example, a fintech client requests an international remittance—the company's system automatically sends a request to the eFX API.

  3. Firm Quote: The eFX provider's system responds in milliseconds with a firm quote, valid for a short period (usually seconds to a minute).

  4. Execution: If the quote is accepted, the client's system sends an execution order. The operation is then electronically recorded in the eFX provider's systems and, consequently, at the Central Bank, without human intervention.

  5. Settlement: The client company transfers the funds in Reais (BRL) to the eFX provider, who in turn settles the operation by delivering the foreign currency to the destination account abroad. The entire settlement and regulatory reporting process is orchestrated by the service provider.

Strategic Advantages and New Business Models

The adoption of eFX is not just an efficiency improvement, but an enabler of new businesses that were previously economically unfeasible. See some examples below:

  • Scalability: Allows the processing of thousands of FX operations per minute, ideal for marketplaces, remittance fintechs, and international payment companies.

  • Cost Reduction: Automation drastically reduces the operational cost per transaction. Spreads tend to be more competitive due to the efficiency of the model and the transparency of electronic quotes.

  • 24/7 Availability: APIs can provide quotes and, in some cases, execute orders outside traditional banking hours, depending on the provider's liquidity structure.

  • Price Transparency: The client company has direct access to real-time rates, allowing better cost management and price passing to the end customer.

  • Creation of New Products: Fintechs and other companies can "plug in" an FX solution into their apps, offering remittance services, international invoice payments, or "global accounts" without needing a full banking license. They focus on the customer experience, while eFX provides the FX infrastructure.

Case Study: Launch of a Remittance Fintech

A Brazilian startup ("EnviaFácil") wants to launch an app to facilitate sending money from workers in Brazil to their families in other South American countries, such as Colombia and Argentina.

Challenge in the Traditional Model

To operate, EnviaFácil would need a partnership with a large bank. Each remittance requested in the app would have to be manually processed by a back office, which would send a batch of orders to the bank. The process would be slow (1-2 business days), expensive (high spreads for low-value operations), and the FX rate for the end customer would be not very transparent and updated infrequently.

Solution with eFX

EnviaFácil chooses not to be a bank, but rather a technology company—it hires an eFX service provider authorized by the BCB.

  • Integration: EnviaFácil integrates its app with the eFX provider's API.
  • User Experience: The user in Brazil opens the app, enters that they want to send R$ 500 to Colombia.
  • Real-Time eFX Operation:
    1. The app queries the eFX API in real time for the BRL/COP (Colombian Peso) pair.
    2. The API returns in less than a second a firm quote: "R$ 500 = 450,000 COP". The quote is valid for 30 seconds.
    3. The user agrees and confirms the operation, and the app debits the R$ 500 via Pix.
    4. EnviaFácil's system sends the execution order to the eFX API, which automatically records the FX operation.
    5. EnviaFácil transfers the amount in Reais to the eFX provider, who in turn ensures the delivery of the 450,000 Pesos to the destination account in Colombia within hours (or even minutes).

EnviaFácil is able to offer a fast, transparent remittance service with much more competitive rates than traditional banks. Its focus is on the digital product and customer acquisition, while the regulatory complexity and FX infrastructure are fully outsourced to the eFX partner.