Queen’s Awards: World First targets forex market gap
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Jonathan Quin and Nick Robinson founded World First, a currency exchange company, in 2004 with the aim of providing a cheaper and better service to small businesses and private clients than the big banks were offering.
Twelve years on from its start in a south London basement, World First is one of Europe’s fastest-growing financial technology companies. It has offices in London, Singapore, Hong Kong, Sydney, Washington DC and Austin, Texas, with plans to open more in the Netherlands and New Zealand.
The company, which wins a Queen’s Award for International Trade, now employs 430 people and expects to add 80 staff this year. World First derives just over half its sales from customers outside the UK, up from 15 per cent three years ago.
Competition in the foreign exchange market is growing but Mr Quin, chief executive, says: “More people are living, working, travelling and investing internationally and more businesses are importing and exporting, so we still think there is a vast market — even with more competitors in it.”
Mr Quin and Mr Robinson, both foreign exchange bankers, started work at Citibank on the same day in 1996. They discovered that while large companies received expert service and favourable rates from banks via the interbank market, smaller companies and individuals did not.
“We kept meeting friends working at smaller businesses and we had friends whose parents were buying property abroad who were getting terrible rates and didn’t get any service,” he says.
The arrival of electronic price feeds in the early 1990s in the foreign exchange broking market provided an opportunity. “We wanted to democratise that process and provide the rates and service and products that the big guys got to the smaller guys,” Mr Quin says.
He estimates that, where a bank might charge a 2 or 3 per cent margin on a transaction, World First will typically take 0.9 per cent. Customers can make transactions online, via a smartphone app or by telephone. “Our app is designed so you can get in and out within a minute if you are paying to somebody you have paid to before.”
Mr Quin says World First competes on price, service and hedging products. Its three business areas are small companies, ecommerce merchants and private clients.
“We are very excited by opportunities in the business-to-business market, including corporate and ecommerce business. We are probably moving towards being a provider for businesses, whereas a lot of our competitors are more in the retail consumer space.”
The margin made by many banks on clients’ currency transactions
The company is seeking to expand its partnerships, in which it provides a “white-label” foreign exchange service on behalf of other companies who offer the service to consumers under their own brands. Virgin Money is a current partner.
World First sold a 40 per cent stake in its business to FTV Capital, the US private equity group, in 2013. The rest is owned by Mr Quin, Mr Robinson and chairman Sir David Clementi, former deputy governor of the Bank of England. Sales were £55m in the 11 months to December, up from a full-year £26m two years earlier, and operating profit was £15m.
World First is halfway through a plan to increase its revenue by five times in five years. While growing competition in the sector squeezes margins, it also raises awareness of alternatives to the banks. Mr Quin says: “We have got lots of good and ambitious people here and it’s an exciting challenge to keep growing the business internationally.”
The typical margin taken by First World on a transaction
The founders had the idea for their venture while working at Citibank, but decided to stay in the City until they had saved enough cash to survive for two years — Mr Robinson went to Crédit Agricole and Mr Quin worked at Royal Bank of Scotland.
Mr Quin believes one of World First’s advantages is that, whereas banks provide an expert service to large companies, smaller businesses are put in the hands of a general relationship manager who may have 3,000 other clients and lacks specialist knowledge of the foreign exchange market.
About a fifth of World First’s business comes from private clients who need to exchange money for things like buying property or paying tuition fees. Its company business is mostly small and medium-sized enterprises exchanging between £100,000 and £20m in currency a year, generally to pay suppliers.
Global ecommerce merchants are a growing area of business. Many are new or fast-expanding concerns. On behalf of a trader selling digital memory cards, for example, World First might collect US dollars from global sales, convert them into a home currency and move these into the client’s account.
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