Global banks and providers of foreign exchange (FX) services in the mature western markets of the US, the UK and Canada are struggling to maintain their share of the customer wallet, with business FX users increasingly using multiple providers reports East & Partners.
The finding comes from the banking market research and analysis firm’s inaugural three country business foreign exchange programme, which interviewed more than 6,500 small and medium sized enterprises (SMEs) across the USA, UK and Canada in June. The new programmes join sister programs covering Australia and Asia.
The programme reviews businesses turning over between US$1m-100m, C$1m-100m and £1m-100m and delivers market share, wallet share and customer satisfaction metrics on the spot FX, options and forwards markets in each country.
East reports that with technology and intense competition driving down margins, spot FX wallet share is under strong pressure in all markets. In Canada, for example, primary providers of spot FX services average no more than 26.8% of their primary customers’ wallets.
This means that for every C$100 in spot FX volume executed by an average Canadian business, C$26.80 goes through what they consider to be their primary provider of spot FX services. The balance – or C$73.20 – is executed through other providers.
It is a similar story in the UK, where average spot FX wallet share is 27.4%, and in the US where it is 30.6%, the highest among the three countries.
East’s research found the FX markets of the three countries were crowded with a large number of competitors, comprising banks and specialist providers such as Western Union and Amex.
In Canada, 16 providers were listed as holders of primary relationships, while the figure for the UK was 26 and 19 in the US.
Across all markets, the highest primary market share was in Canada, where a leading domestic bank had a 27.1% share of the spot FX markets among micro businesses turning over C$1m-5m per year.
In the UK lower corporate markets – for businesses turning over £20m-100m – only one provider held double digit market share, and that was at a lowly 10.8%.
Lachlan Colquhoun, head of markets analysis at East & Partners, said the three country research reinforced thinking on global FX in mature markets. “In our Australasian and Asian research we see that FX is the most banked away product, and this has been strongly reinforced by extending the program to Canada, the UK and the US,” he added.
“Technology and the ease of execution have opened the doors for specialist providers who are competing on price, and it is increasingly easy for businesses to pick and choose, so there is little loyalty.”
Sentiment in the financial services sector deteriorated in the three months to September, as firms digested the challenges of lower interest rates and the uncertainty caused by the vote to leave the European Union (EU), according to the latest CBI/PwC Financial Services Survey.
However, a London summit on the industry’s introduction of the technology cautions that testing and acceptance are still at an early stage and firms should proceed with caution.
The proposals of both US presidential candidates could shake up operating conditions in several sectors, reports the credit ratings agency.
The Danish shipping and oil conglomerate confirmed that it will separate its businesses into stand-alone transport and energy divisions.