Among recent trends in the foreign exchange payment field, Forex Magnates has witnessed steady growth of new entrants coming to market with alternative transaction services. Aiming to disrupt the models of established financial services from banks and money transfer firms, alternative providers are marketing lower cost solutions and or products that fit the needs of niche industries. Unlike FX trading, where pricing has dropped across the board for both large and smaller players, physical foreign exchange costs remain high as conversion fees from major banks and transfer firms like Western Union will routinely be in the 1-5% range, versus spot rates of a few pips. To provide more attractive rates, alternative FX transaction businesses will typically leverage their existing relationships with bank trading desks to source tighter institutional pricing, which they then pass on to their small and medium sized customers.
Taking a different path than many of the other new alternative FX transaction providers, UK headquartered Kantox, created a peer to peer matching platform for its customer base. The product works with clients entering their exchange needs, with the ability to have the FX transaction matched by another company with an opposite demand. In addition, for cases when there is no natural matching of transactions between firms in the network, Kantox has integrated liquidity from the wholesale market, similar to the typical model being used among alternative firms mentioned above. According to the firm, the dual model has allowed their small and mid-size enterprise (SME) customers to experience 78% cost savings from their previous relationships, with Kantox on pace to process over €1 billion in transactions for 2014.
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Speaking to Forex Magnates, Philippe Gelis, Co-Founder of Kantox stated that the company currently has “over 500 business clients using Kantox across Europe.” He added that “Our customers are mainly SMEs, with revenues ranging from around £5-200 million, but we also have mid-cap clients with revenues in excess of £1 billion. Our customers are spread across a variety of sectors, from tourism to cosmetics, media, consulting, engineering, technology, fashion and transport.”
Following on the company’s growth, Kantox has announced today that it is collaborating with members of the European FX community to create a new European Advisory Board. Joining Kantox on the board are Claire Bridel, former COO EMEA of Natixis CIB, Magnus Lind, Chairman of Treasury Peer, and François Masquelie, Head of Corporate Finance, Treasury and Risk at RTL Group. After securing a €6.5 million in funding earlier this year, the goal of the board is to provide Kantox a structured bi-annual meeting place that according to Kantox is to “consider upcoming industry changes to ensure that Kantox stays ahead of the curve of FX trends and continues to offer its customers a ground-breaking service.”
As a provider of low cost transactions, the chief value proposition Kantox, and other alternative FX transaction providers offer is competitive pricing. However, as seen in FX trading where spreads have tightened in the last five years, a similar trend would be expected to take place if alternative firms grab a large enough chunk of physical FX transactions from banks. Commenting about benefits beyond just cost savings, Gelis stated to Forex Magnates that he believes “Alongside cost savings, Kantox has brought transparency, efficiency and competition to the FX market. While large corporations enjoy access to transparency and competitive rates, SMEs and mid-caps – who usually don’t have access to live rates or an in-house FX expert – are largely kept in the dark by banks in matters of FX. This makes SMEs an easy target for bankers and brokers, who play on the confusion of small businesses and mid-caps to charge unfair rates. Kantox is levelling the playing field for smaller companies and bringing light to an opaque market.”