As regulation in FX/CFD trading gets stricter and more standardised across jurisdictions, we’re witnessing a host of new entrants to the space. Many of us in the industry were expecting that a more stringent regulatory climate would lead to consolidation among existing players. This is because of the rising costs of compliance and narrowing profit margins due to stricter rules. However, what some of us didn’t expect, is that these new entrants would be retail banks.
More than a decade of ultra-low interest rates, and a post-COVID reality in which central banks don’t appear in a rush to hike, have severely affected the bottom lines of many banks across the globe. Add to this a new generation of online “challenger” banks that have been surging in popularity since banking regulation changes in the wake of the GFC, and you have a situation in which many retail banks are looking elsewhere for sources of revenue.
Retail trading is quite a logical pivot if you think about it. Retail banks already have the financial relationships in place to act as brokers. They also possess large, untapped customer bases and find themselves at a historic juncture where trading has never been more mainstream. The past 20 years have seen financial literacy and the appetite for market access exploding among the public. Banks that already have the trust of their clients as a given, stand to gain a large share of retail trading volumes if they play their cards right.
Here at PandaTS, we see this shift as an important opportunity to capitalise on the industry expertise we’ve garnered over the years as a technology provider. We believe that the success or failure of retail banks entering this space will hinge on whether they learn from the prior mistakes and successes of the retail trading industry, or attempt to go it alone and reinvent the wheel.
Over the past few decades, our industry has undergone a great deal of development. Trading platforms, business models, and customer relationship management have all come a long way and are constantly evolving. In our view, the best practices our industry has perfected and the technologies that underpin them are crucial to this new wave of entrants to retail FX/CFD brokerage. It’s almost as if some other party has done all the R&D that the retail banks require to make this new direction a success. In our view, there are 3 key areas retail banks need to pay close attention to before bringing their own trading solutions to market.
1. Trading Platforms
Whether MetaQuotes is likely to be the standard-bearer for the retail banks as it has been for retail FX, one thing is certain. Banks entering the arena should do so with their own fully branded and unique front-end trading platforms that are available both through the browser and as smartphone apps. Preferably, these platforms should allow all relevant actions to be taken by the trader from within the app and should be fully integrated into the CRM. These details are really non-negotiable in 2021 and beyond. With so much interest in zero-commission brokerage apps and crypto exchanges, we’ve seen competition also increasing in platform technology. The bar is now set a lot higher, as are the demands of retail traders.
We’re almost reluctant to use the CRM acronym any longer because these systems have evolved far beyond customer relationship management. Take Panda CRM, our company’s flagship product. Panda CRM is a full business intelligence suite that provides vital functions for all departments, not just sales and retention. Today’s CRMs allow for entire brokerage teams to coordinate, communicate and access client information on a granular level. There’s no way to overstate it. The choice of your brokerage’s CRM today will influence how your teams are able to work together in the decades that follow.
3. Risk Management
The science of trader segmentation, of deploying A-book, B-book and hybrid A/B book strategies, has come along in leaps and bounds in recent years. These capabilities are very important for modern brokerages as they make the difference between dealers fumbling around in the dark, and a data-driven approach to how orders are routed for full regulatory compliance, risk mitigation, and profit maximisation. Also crucial, is the ability to change the parameters of these systems so that a brokerage business can remain compliant while continuing to broker trades, even in a constantly changing regulatory landscape.
At PandaTS we welcome all new entrants to the online brokerage industry. We have the experience, the technology, and the ability to offer custom solutions so that whatever vertical your business is coming from, it can make a strong entrance into the world of online trading. For more details on the solutions we offer, please contact our team of success managers for a detailed presentation of our products.
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