How Can Retail FX Brokers Use a Technology Partner to Grow Business?
In the complex and highly saturated FX market, it is not uncommon for retail brokers to have different business models and be at different stages of development. Although the problems faced by many may be different at a single point in time, from a long-term perspective, the ultimate goal is always the same:
- Increase profitability
- Reduce costs
- Control risks
This blog uncovers the benefits of a retail FX broker partnering with a technology provider, as well as provide some potential drawbacks.
A big advantage of working with an experienced financial technology provider is that they can tailor the suit for each broker depending on the individual goals. The business set-up allows them to adapt quickly to changes in the market as they have the technical manpower to continuously innovate and develop new products. Below is a breakdown of opportunities that a broker will benefit from if partnered with a technology provider, at each stage of growth.
If a business is in its infancy, its founders are usually full of curiosity about the FX industry and may hope to enter the market quickly. They could have sufficient funds but lack operational experience, or they could have their own professional technical team. Does this sound like you?
Liquidity management is at the heart of any successful brokerage. For early-stage brokers just entering the market, I would strongly recommend starting with the MT4 Bridge / MT5 Gateway plug-in as it’s easy to learn and very cost-effective. Simple it may seem, but that does not stop it from being a breakthrough piece of tech in your trading operations.
After the baptism of the market, a retail FX broker has accumulated the experience and entered a period of rapid growth. At this stage, the most basic business can no longer satisfy the appetite of their end customers. Now is the time to investigate how you can diversify your offering, as new tricks are necessary to remain competitive and keep winning more business.
A way of diversifying, for example, could be to introduce other tools that enable the horizontal and vertical expansion of the business. Such technologies to consider may include:
- New trading products
- Liquidity pools
- Multi-account managers (MAM/ PAMM)
- Copy trade
- Batch modification of swap rate
- Stock dividends
...the list goes on!
There are situations when a business gradually stabilizes, the brand image is firmly established, and business tends to begin to settle down – which has its pros and cons! This is when the importance of customized products and services including more detailed risk management become invaluable. If you haven’t already, then finding the right partner at this stage is necessary but can be daunting. A technology partner should act as a guide to reveal all the opportunities and find a holistic solution that fits your needs.
At the same time, more emphasis should be placed on internal-based management. It is important to implement the businesses’ philosophy into concrete and calculable indicators, to enable valuable solutions and data-driven insight which can help guide the future development direction and redistribute resources.
For example, it may be helpful to determine:
- The most valuable customer group
- The business segment with the highest profit margin
- The business development direction that has the most potential
- The development trend of each department in recent years, whether it is balanced, etc.
What to look out for in a technology provider?
No matter what stage your business is currently in, finding a technology provider that has the experience and meets your individual needs, from a product and service standpoint, should be at the forefront. The spirit of service should not be underestimated, when problems are encountered, timely response and continuous follow-up are invaluable. In a saturated market, what distinguishes the good from the great is the ability to discover the potential risks and provide feasible solutions before any problems occur.
What are the drawbacks?
Not all outsourcing of technology will encounter issues. However, it is important to find a technology partner that can eliminate concerns by demonstrating a proven track record of success.
Lack of communication is one of the risks. Language barriers and lack of timely support can cause issues, therefore finding a partner who has a good reputation and solid support team is something to look out for. Usually, within the first few conversations, it will be clear if there is a level of trust-building between the two parties which is extremely important in building a long-term relationship.
On the more technical side, the reliability of the product is key. If a product seems particularly cheap, sometimes the reliability is compromised which could only cause you bigger problems in the long term. It can seem overwhelming to switch between providers, which is why spending time making sure you have chosen the right one for your business at the start will save you a big headache in the future.
Since being founded back all the way in 2008, Gold-i has experienced the many ups and downs of the industry, been through the vast regulation changes and has witnessed many successful and unfortunately failed broker businesses.
But, seeing these experiences first-hand has helped us guide and support our clients to avoid making the same mistakes. Gold-i will always uphold our corporate value, continue to innovate and aim to provide our valued customers with suitable products and professional services to support them on their journey of growth.
Whether you are a small FX or a large multi-asset retail broker, take a look at Gold-i's growth product suite. We aim to grow with you, so whatever stage you’re at, get in touch today, we’d love to hear from you.
Written by Joy, Laurence & John, Shanghai office.
Learn more about Gold-i's Growth Product Suite for retail FX brokers.