3:06 pm - Tuesday September 26, 0665

Differentiators in FX Business

The foreign exchange market is the largest and most liquid sector of the global financial system. Bank for International Settlements’ Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity 2004, estimated foreign exchange turnover averaging USD 1.9 trillion per day in the cash exchange market and an additional USD 1.2 trillion per day in the over-the-counter (OTC) foreign exchange and interest rate derivatives market. The developed markets continue to see accelerating growth in foreign exchange volume. They are in the forefront in meeting their customers’ requirements. There are certain aspects which merit importance in customer satisfaction efforts.

Need

With the ever-increasing volume handled in the market place and with every player trying to position aggressively to have a major share, there is a coordinated effort to win over the hearts of the customers. Unfortunately the focus has been hitherto on what these players can offer in the market place rather than ascertaining the requirements of the market place. This study is making a sincere effort in checking up with the customers on their needs and expectations to enable the players to reposition them in the market place.

Survey and major findings

I have undertaken an international survey to ascertain the needs and requirements of the market place in this business. The customers in the various groups of countries have identified the following as the key areas of foreign exchange business – Skill specific, Customer specific, Marketing and Planning.

While Americas and EMEA have accorded ‘customer specific’ area as the top ranking, Asia focused on ‘skill specific’ and ANZ on ‘Planning’. Other than ANZ, every one has given ‘marketing’ the lowest ranking. In ANZ ‘skill specific’ issues are accorded the last ranking.

Probably the customers in Americas and EMEA require the focus area as ‘customer specific’ issues as they appear to be hungry for new products and services. In Asia the customers expect market players to be more knowledgeable and raise their standards as available in Americas and EMEA. In ANZ, the ‘planning’ focus may be due to their felt need for integration and up gradation.

Detailed analysis

A more detailed analysis of the four key areas of foreign exchange business brings out interesting revelation.

Skill specific

The customers have voted overwhelmingly in favour of the following components that merit attention and importance under skill specific area – Competitive price, Quote speed, Settlement, Credit rating and Liquidity management.

All these components focus on the background and knowledge base and operational skills of the players in the market place. It is indeed heartening to note that customers now demand more from their service providers and would like to dictate a ‘standard’ to the market place.

Customer specific

Where the market is more matured, the customers turn in to their specific requirements as the key focus. These requirements have been listed as under – Selection criteria, Flexibility, Any time /any where facility, Relationship and Strategy advice and guidance.

One may observe that these requirements are turned towards the individual customers as they expect high quality offerings from the market players.

Marketing

Marketing is an evergreen topic for markets and naturally customers are no exception. However our customers in almost all the country groups have voted to retain ‘marketing’ as a key area but none of them ranked it higher. This does not mean that it has lost its ‘relevance’. The components chosen by the customers to group under ‘marketing’ make an interesting reading – Research and development, Product breadth, Currency breadth, Innovation and Service at door steps.

These components are not ‘plain vanilla’ expectations. Each of them has their specific focus and naturally the customers have prioritized them.

Planning

It is interesting to note that the customers have identified the following components to come under ‘planning’ key area- Technology, Risk management, Developing market, 24 X 7 desks and Integration with other markets.

Other than EMEA, all the other country group customers have retained ‘planning’ as the top ranking (either 1 or 2) key area in foreign exchange business. Probably in EMEA the pressure is not felt that much as the customers appear to be satiated – comparatively. An important finding is that the customers from ANZ group expressed their felt need for better integration with the world markets due to their time zone placement.

Conclusion

Compared with the developed markets’ foreign exchange business volume, technology up gradation and best practices, our emerging markets appear nowhere in the picture.

If these emerging markets judge the mood of their markets right and pursue the right strategy, internally enormous scope and opportunities exist for developing their foreign exchange business. To sustain and succeed they may need to start from the end customer perspective and focus on customer orientation in their basic framework. Technology will definitely come to their rescue.

There is also a lesson or two for the developed markets to learn. Though they are advanced, their customers are also more demanding require their market place to specialize in their chosen field and focus on their requirements. This by no means is an easy task. The market place will need more advanced tools and techniques to facilitate them and technology up gradation would be the only solution for this.

This leads us to a final conclusion. Whether it is developed or developing market, technology remains the ultimate solution provider to the requirements of the market place in meeting the needs of their customers

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