Has the CFD Industry Become Lazy?

Finance Magnates spoke with Michał Karczewski, the COO of Match-Trade Technologies for his perspective on the CFDs industry and the evolution of the retail brokerage industry.

You have been in the CFD industry for many years now. What do you think, where is the industry heading?

This may sound harsh but… As an industry, we have had many plentiful years; that’s why the market is saturated with Brokers right now. Unfortunately, in my opinion, this will change, the market will soon start shrinking for many Brokers as they won’t be able to compete for the customer.

Why do you think so?

The world is changing, and everything around us is moving forward, whereas our industry has become very lazy. Many of us believe that the way we have been operating and making money for the last ten years will bring the same results in the next decade. Unfortunately, this impression is wrong.

History is full of examples of companies and products that have dominated the market in the past but are either gone or have a negligible market share. It is no different in the CFD industry. If the most significant innovation introduced by the Broker is the addition of another 100 or 200 CFDs based on shares, then, in the long run, such a Broker has no chance of surviving.

What, in your opinion, these Brokers should do then?

First of all, we should start looking beyond the industry and what our competitors have done. The world is changing. So are the technology and consumers’ habits. That means we should change, too.

If we cannot set trends, we should carefully observe them, react and adapt. The gambling, e-commerce and cryptocurrency industries are excellent examples to follow. They are much more competitive than the forex industry, so innovation is the only way to win a client. If we go to e-commerce or gambling expos, we can see new products and innovations at every event. Whereas in our industry, the same products are presented every time, only they are called ‘version 7.0’. That’s why I believe that we have rested on our laurels and have become lazy as an industry.

You are saying many Brokers may not survive in the long run. Where do you think the threat is coming from?

I believe that some damage has already happened and that its consequences are getting stronger every year. I can see two sources of threat for the forex industry.

The first one is the rapidly growing neobanks business, offering modern trading applications. Each of its companies is supported by ever-larger financing rounds, which allow them to invest vast amounts of money in developing technology and marketing.

The second source of threat is cryptocurrency exchanges, which until recently were the real wild west but now began to acquire licenses all over the world, not only for cryptocurrencies. We have examples of exchanges with newly acquired licenses in Cyprus, which are the same licenses that most Brokers have. This means that they will be able to offer the same CFD instruments as most Brokers.

Those two types of entities have one thing in common, one that will allow them to take over the market. It is a new level of User Experience in trading applications. I recommend every person responsible for managing a brokerage download different applications created by the companies I mentioned, create an account, and trade. Then try to do the same in your own company’s application. I think this will allow them to understand what I’m talking about.

Is it that bad? Are there no Brokers who have already implemented such changes?

Of course, there are. Unfortunately, only several companies do it right. I watch those Brokers, and even if they are not my clients, I root for the people who manage them because we’re on the same wavelength.

There are also a lot of Brokers who see changes but lack the skills to prepare. Many of them decide to create their trading platforms from scratch without having the resources or experience in product development. As a result, applications of very dubious quality are created, which will not be able to compete with the products by the companies I mentioned earlier.

So, how do you prepare for the upcoming changes? After all, it is also your industry, and therefore you should care about Brokers being competitive against neobanks and cryptocurrency exchanges.

Correct. We have been aware of the industry changes for a long time; that's why we've decided to design a platform focusing on modern solutions and User Experience. That's how the Match-Trader, our proprietary platform came to be.

We have built a platform based on Progressive Web App (PWA) technology, which is becoming very popular. During the entire process, we put a lot of emphasis on User Experience, which we are constantly improving.

How do you know that Match-Trader will be able to compete with those modern apps you’ve mentioned?

Good question. I don't know that. We are trying to maximise the probability that it is our platform that the trader will ultimately choose. You never know for sure what the client will do.

The Match-Trader platform has been operating in the White Label system for some time, which, speaking immodestly, has proven itself, and we put new instances every month. In addition, taking the numbers into account, I must admit that Brokers using our platform are developing at a decent pace. Even though they often have meagre marketing budgets. To us, it means that our platform is indeed attractive to the end-user.

You mentioned the White Label offer, which is probably popular among startups and rather small Brokers. What about larger Brokers?

That’s right. For the last 2.5 years, we have focused on the White Label offer.

Now, as we already know that the platform has been tested and well-received on the market, we are ready to come out with an offer for larger entities. We can now provide the full server license giving Brokers full administrative access and the ability to decide on the settings, instruments, and other parameters.

We plan to showcase our new offer during the iFX Expo International in Cyprus so that new products and innovations will start also appearing at the forex expos. :)

In addition, we decided that the first three Brokers who obtain our platform in the full license model get special treatment far beyond the standard package. Together with the Brokers, we want to prove that we, as an industry, can still be competitive and offer traders the User Experience they not only expect but deserve.