For all its flaws, one thing the CFD sector does well is innovate. Whenever I’ve been to an industry event, there’s always been at least one tech provider that is doing something relatively novel and interesting.
A lot of the time you do get a lot of people doing the same thing though. There is hardly a shortage of platform providers or payment solutions, for example.
One company that is doing something a bit different is OvertEd Markets, a platform that lets brokers analyse their competitors, based on several different parameters, most notably market share across different jurisdictions.
I spoke to Josh Bentley over the weekend to learn more about the company and what their technology can do for CFD brokers. Josh, who worked previously at GAIN Capital and ThinkMarkets, co-founded OvertEd Markets with Mark Kontkowski, another former GAIN Capital employee, who also spent time as a technology analyst at Lehman Brothers and Man Group.
If you are interested in learning more about OvertEd Markets, you can see their website here.
Can you explain what OvertEd Markets does?
We provide competitor analysis data for brokers in the FX/CFD industry. There are lots of data points companies can look at on our platform, like what payment options are on offer for example. But probably the most actionable information is being able to look at the market share of brokers in different regions.
For that we look at and analyse customer journeys that led to a successful deposit. So you can look at a specific region and understand what process is most likely to lead to a successful customer deposit.
The good thing about this is that the data points we look at are transferable. By that, I mean the algorithms we use to gather data can be taken from one region and then used in another. As an example, one of our clients was looking at expanding in a country in Africa. At that point we had no data on the country in question but we could take the data gathering methodology we were already using, apply it to that region, and then give them actionable data to use – so quite a lot faster than flying there and getting people to fill out surveys.
You’ve only been operational for about 18 months but you’ve already got quite a few clients. Do those tend to be smaller firms or bigger players in the sector?
When we started, we assumed that it would be the smaller companies or newcomers in the sector that wanted to use our services, the ones looking for growth, who were maybe struggling to expand.
But the complete opposite ended up happening. It was the big players that wanted to work with us because they could see we were filling a gap they had. Basically, they already do a lot of competitor analysis, whether it’s in house or getting consultants to work for them. So they could see the gaps in the information they already had, and saw that we could fill them in. That includes one London-listed firm and another company that’s about to list in the US. We have companies with major operations in Japan, the US, and the UK – as well as lots of other markets – working with us now.
In some ways what you’re describing, in terms of knowing what the competition is up to, sounds too good to be true, particularly in an industry which is really opaque. You don’t have to give away your secret sauce but can you give some indication as to how you figure out things like market share and how likely a customer is to deposit?
To set your expectations somewhat, we don’t have a funding screen in front of us saying that person X in a specific country joined this broker and deposited, for instance, $1,000, and then went on to trade a particular asset class.
What we can do is look at a huge number of data points and say, ‘ok, if a prospective customer hits these different data points, the likelihood is they are going to deposit.’
Has that been validated in any way?
Yes, so some of the bigger players we work with have their own data sets. Again, they may have built those in house or hired consultants to do it for them. They compared what we’d done to theirs and it was clear that we were producing accurate information.
There have also been lots of occasions where we’ve spotted something before it’s become public, meaning we can compare the information we had to what’s later revealed in the press or elsewhere.
So, for example, one broker undertook a really big drive to expand in Singapore not too long ago and was winning market share there. More recently one UK-regulated broker had been winning a lot of market share, was upping its volumes and so on.
In both instances we had that information way before it went public and so it was really satisfying because we could turn to our clients, not in a bad way, and say, ‘hey, we told you so’ after that information came out.
Is the data your clients see usually self-explanatory? I mean, if data shows a competitor is behaving in a certain way, is it obvious why that’s the case and you, as a company, can respond accordingly?
When we started, we tried to be neutral. By that, I mean we thought we’d give clients access to the platform and that they could use it as they wished.
What’s happened over time is that we tend to provide additional insights in certain circumstances. To give an example of that, one of our clients saw that a competitor was pulling out of their traditional markets and trying to move into others. Without going into details, there were reasons we thought that was the case and we provided that supplementary information to the client.
Data has been a buzz word since I started working but what I’ve often found is that you might gather a lot of information that’s interesting but not necessarily useful. So if I know that my competitor is expanding in Singapore, for example, that’s obviously interesting, but how can I use that to my advantage?
Ultimately it’s about allowing brokers to cut costs on client acquisition, take a more strategic approach to growth, and build a more sustainable business.
I said that we were surprised that some smaller firms weren’t using us but, in hindsight, it shouldn’t have been. What we see is that a lot of companies in the industry just throw their marketing budget against a wall to see what sticks. This is part of what makes client acquisition so expensive, so it’s not a great approach to take.
Can you elaborate a bit on that? What do you see them doing with their marketing budget and how would OvertEd Markets improve on that approach?
If you look at some of the really big players in the industry, and we can see this from the data we gather, you will be amazed at how targeted they are. I think the sense people have is that they’re all in, trying to get clients from everywhere. They might be active in lots of places but it’s typically a small number where they are really targeted and getting most of their clients.
So what you can say is, if you’re a broker looking to expand, you need to localise and really cater to the needs of people there. Look at the payment gateways they want, look at a particular demographic, and emphasise these products. Particularly if you’re a small player, this can be your competitive edge.
Our product lets brokers do that and there are a couple of benefits. One is that you have a much clearer goal for your team, whether that’s in marketing, sales, or whatever. You can say to them, ‘ok, this is the region we’re targeting, with these products, and within this demographic’.
This also allows you to cut costs. When you know who you’re going after and have a good idea of how to acquire them as a customer, it becomes easier and cheaper to do so.
We also think that creates a more sustainable business model. Burning through money and seeing what works is a really common trend in the industry but it’s not a sustainable one.
But the churn and burn model remains really pervasive, if it’s not sustainable then why do so many companies do it?
The FX/CFD sector is in a good position on one level, because the market for services which can help people increase their wealth is always going to have mass appeal. This can give the perception that there is an endless pool of prospects.
However, in my opinion, not only does this model raise ethical considerations, but it also fails to make business sense. If you have deep marketing pockets, then it does give you a degree of traction and you can certainly generate profit. But client acquisition is very expensive and under this approach you need continual high spend to replenish clients, who are of questionable quality. It is also a model that breeds scandals, which we see pop up all the time to the detriment of all those involved in the industry.
The other point is that, in my opinion, and what separates the serious, big, international players in the sector from the rest is that these companies invest in brand, invest in localising, invest in strategy. And the outcome is that they end up getting clients organically and at a much cheaper rate than their peers. Those clients also tend to be of a much higher quality than the ones you get with a churn and burn model. It is a win-win for the broker and the client.
We can help brokers that want to make that shift. We use data to actually create sustainable brokerage business models that are not reliant on ad spend, that are not reliant on paying massive amounts for marketing, that don’t rely on continual SEO and instead rely on creating a business with a strategy which is trying to acquire top quality, sustainable clients that are going to produce sustainable, long term revenue.
To finish off, are there any things which you see brokers doing poorly, or really well? Or are they any surprising bits of information that you see from the data you gather?
One thing I think people may be surprised at is where brokers are operating and also how localised they are there. So a company may make a lot of noise about being regulated in a certain jurisdiction but it’s really common for them to be making a lot of money in a small set of countries that an outsider would probably be surprised by. And as I said, we’ve often been amazed at how targeted they get. They’ll really know their stuff and be good at building local networks and understanding their audience in that region.
The other point is that we hear all the time about a disconnect between marketing teams and what I guess you could describe as high level strategy. What I mean by that is you’ll have executives at the top of a firm making decisions about where they want the company to be focused and, even though the marketing team are all really good at their jobs, that doesn’t necessarily filter down to them. They’re also often short of useful data to use to do whatever it is those senior executives want them to do. So if you’re trying to expand into a new region, a tool like OvertEd Markets is really useful to have because it can let marketers do their job and also help them visualise what management actually wants in terms of strategy.
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