Competition Fierce in UK’s FX Market

The UK’s business foreign exchange (FX) markets are among the world’s most competitive, with an average share of customer wallet for a primary service provider or bank only 27.4%, reports East & Partners.

The results come from the business banking market research firm’s inaugural UK Business Foreign Exchange Markets report, which looks at the spot FX, options and forwards markets for companies turning over up to £100m a year.

East’s research, completed from 2,212 direct interviews with UK businesses in August, found that in the spot FX markets only three of the 26 providers had a primary relationship share in double digits.

The leader, a domestic UK bank, held a 15.1% share of primary spot FX relationships and was dominant in the micro segment – of businesses with annual turnover of £1-5m – with a 19.9% share.

Across the whole market, excluding the big three providers with double digit market shares, 54.5% of primary spot relationships are shared across a plethora of competing providers, making the UK markets one of the most competitive in the world.

In terms of secondary market share, only two providers hold double digit market shares with the biggest of these being 11.8%.

Lachlan Colquhoun, head of markets analysis at East & Partners, said the UK market was more competitive than comparable markets in the US, Canada, Australia and Asia.

“Businesses which use FX services are using multiple providers, and are being driven by price and ease of execution,” said Colquhoun.

“In terms of wallet share, the average for primary relationships in the market is only 27.4%, which means that for every £100 a business puts through in spot FX, the primary provider is only getting £27.40 – and so £72.60 is being spent with other providers.”

“The UK market comprises domestic and European banks, and also US and global banks and specialist providers such as Western Union.”

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