On this show we have an ideal guest to guide us through “FX in the Fintech Age”. Philippe Gelis is the CEO of Kantox a B2B FX Fintech who recently passed the $1bn of business done mark.
At that level you really have left any notion of “startup” far behind and are much nearer the bank of the river that is Financial Services.
Kantox provide SMEs and Mid-Cap firms with BigCo levels of FX service. One of their clients alone saved €400,000 last year compared to going through their bank.
As you will have all noticed, the past nine months in particular have been full of “sugar and spice” spin about Fintech in general. However there are few sectors that are actually making waves in terms of the real economy right now.
Interestingly the whole P2P idea is key to those that are – albeit that P2P means less and less as a term. P2P online lending and borrowing we have discussed a lot of on the Podcast this year. P2P FX is similar but also very different.
P2P FX is perhaps less concerned with what one might call “purity of mechanism”. P2P FX firms tend to do what it takes to execute the trade – they feel comparatively less need to stick with #newFS execution if #oldFS execution can provide a better or faster price for the client.
Topics discussed on the show include:
– why doesn’t every Fintech have an office in Barcelona (where Kantox have a back office)
– the origins of Kantox and the background to the thinking around the business model
– the FX market, liquidity, transparency and how come the largest market in the world charges such high prices to clients
– the timelines for the origins of P2P-FX
– the move from “pure P2P” (ie matching counterparties on both sides) to focusing on best execution at any moment in time
– the important and huge differences between P2P-FX-B2B and P2P-FX-B2C. This is rarely focused on (or even mentioned at all?) but it’s really important to understand the difference in what they provide (especially as FX-B2Cs spend a lot on marketing and advertising and you might wonder “what is missing” and why one needs a B2B players…)
– why P2P as such is becoming a redundant term. The challenges of P2P in general and maturities; how far forward Kantox deals (and where the demand goes out to)
– the internet as not disintermediating but re-intermediating and the importance of efficiency in driving this process
– why it doesn’t make sense to think of P2P-FX as P2P – there are just clients trying to execute a trade (no asymmetry unlike P2P-lending/borrowing where there are two very different categories of client and risks they run)
– why SMEs don’t like the whole gamification angle of P2P – they just want to hit a quick, clear, price
– what transparency really means … a major difference between B2B-FX and B2C-FX … in the former you get the price you see … in the latter you find out what price you traded at after the event [and maybe in some cases not even the time of the trade (!)]. As always in Fintech transparency is less of an absolute than many of the participants imply…
– the resulting issues around risk are completely different for B2B (cf an a FX broker) and B2C (“pre-funded”) where they only trade when the have your cash (so no delivery/settlement risk etc)
– FX-P2P-B2B as a result is (IMO) one of the most professional Fintech sectors by far – it needs capital, has to manage real FS risks, and as it interfaces by executing with existing FS players they have to have solid FS standards (rather than almost all #newFS Fintechs who are still on the journey towards that destination)
– the value of having done $1bn both from a marketing perspective but also in terms of testing your machine and getting increasing confidence around what risks will occur
– how much excess capacity Kantox build into their system
– the problems banks have developing products for clients compared to Fintechs
– lessons from the Swiss Franc huge move – the leveraged-FX sector encouraging speculative trading and how that is a completely different kettle of fish and how it is under-regulated (hence firms falling over). Kantox never do “leveraged” business.
– Kantox growth plans
– why no Fintech firms of note have been set up by purely Tech people
– is it an anomaly that the regulation around P2P-FX is far tougher than P2P-lending/borrowing?
… and much more 🙂
So lots of value and information in this show and some very important distinctions and details I hadn’t read about before myself 🙂