Whoever can interpret these trends, align and focus their existing core competencies or build new areas of strength, grasp the reins of innovation and take the lead in defining the new epoch of competition, will undoubtedly win market share and become a formidable presence in the FX industry. Technology will be central to any solution.
Businesses looking at the opportunities to introduce better pricing, transparency and simplification of currency risk management solutions, such as hedging through currency forwards and options, are blossoming. The Currency Cloud (
www.currencycloud.com) is one firm that I find particularly exciting and I feel is moving in the right direction. It is building key capabilities around digital distribution and aggregation of transactions to pass on exceptionally low and transparent conversion and payment rates to consumers by feeding the likes of currency brokers, remittance agents and mobile and online payment providers (such as
www.transferwise.com). The Currency Cloud promise the banks a larger volume of FX flow from a single source
and therefore have considerably more power to negotiate better conversion rates that they pass on to their clients, who in, turn, pass on the low rates to their own clients. The bank’s role at the top of the pyramid becomes one that focuses on risk management and payments facilitation.
An intelligent
proposition and one that I am sure will be fortified as the business matures.
HIFX (
www.HIFX.com) has been operating for several years providing targeted FX and payments services to corporates. They are willing to commit to a relationship with time, providing the education and handholding that is still often necessary to help the majority of UK businesses better manage their currency risk and perform more accurate business forecasts.
Their
growth and expansion overseas speak to the gap in the ability of banks to service smaller corporate needs. Other, more radical initiatives include Kantox FX (
www.kantox.com) that seeks to leverage the momentum in Peer to Peer business models and completely dis-intermediate the banking sector. I have my doubts on P2P in FX due to the number of variables involved in
matching a transaction – currency pair, amount, timing and duration. It will be interesting to see if a P2P FX business can build enough momentum and liquidity to ensure a viable proposition in the long term.
Positive change in FX is certain. I believe there is much value in the FX industry that is not being effectively captured. The entrepreneurs and firms that intelligently research and analyse the industry, its markets and the macro trends in the surrounding environment, identify the scope for real innovation in process, service and business models, will reap the rewards. The benefits of automation in processes and risk management need to reach the consumer and SME markets. The weapons and strategy within the FX industry are evolving; the ensuing battle between service providers will see some fall, but the outcome will ensure tremendous benefits for customers.
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