Businesses hit by currency volatility and worried by economic uncertainty are increasingly turning to alternative finance services, helping one London FinTech startup fly.
Kantox, a peer-to-peer forex platform for business, has flown past $1bn (£657bn) in currency transfers since setting up shop in the capital in 2011 with an astonishing 20 per cent of that- some $200m- transferred in the last two months of 2014 alone.
The London and Barcelona-based Kantox has grown more than 250 per cent in 2014 as businesses search to protect profits from FX risks by using Kantox to move money, which cuts out the middle man of banks and brokers but offers the same live market rates.
Founded by former Deloitte consultants Philippe Gelis and Antonio Rami, Kantox has attracted investment, from among others Partech Ventures and Idinvest Partners, totalling more than $10m.
“People trust you and feel comfortable to trade with you when there’s volatility in the market. Our philosophy is being transparent and fair, offering clients consistent prices. We are not looking short or medium term but at the long term market,” said Gelis.
Of the 1,000 businesses using Kantox, roughly double the number using it this time last year, Gelis expects all of them to remain with them for the next ten years.
The platform has also seen its largest single transaction to date of more than $21m from euros to dollars last year.
This growth is set to spiral and Kantox expects to hit its second billion by the end of 2015.
Alongside companies turning away from banks and brokers and looking for something better during uncertain time, Gelis says now is the time for FinTech for business to come into its own.
“FinTech is getting really hot but businesses have been slower than consumers to take it up. In the last six to 12 months it has really sped up in the b2b side. In the business segment you can’t buy growth through spending on marketing or social,” Gelis explains. “It’s very different, clients take more work to convert and you can’t expect the same metrics and goals as consumer FinTech. Business to business snowballs. It’s hard to convince 10, then it’s easier with 100, and then even easier with more than 1,000 across 18 European countries.”
Businesses using Kantox cut across sectors as diverse as industrials, cosmetics and automotives.
When it comes to giving banks a run for their money and vying for an even larger share of the trillion-dollar currency exchange market, Gelis is no less ambitious having hit the $1bn milestone.
Gelis is on a simple mission: “Everyday I think, how do I get money from banks and brokers? It’s a good mission to have.”.
Where does that leave banks?
“There are two types,” Gelis explains. “There are larger banks that know FinTech is here to stay. They are comfortable partnering, investing in and funding startups, for example Barclays in the UK or BBVA in Spain. The second type of bank is more local, scared, trying to compete, or convince clients not to go with a FinTech startup. They feel threatened or try to compete on prices.
“Banks will not disappear. I always say, their first mission is to collect deposits and lend money, so as that, they’ll always exist, strong global banks are here to stay. FinTech will brings a much better UX, more sophisticated online experience and better relationships. FinTech is much more efficient when presenting a product to customers.”
This will leave banks providing the infrastructure and FinTech firms acting as the intermediary between banks and clients, predicts Gelis, and banks will soon be calling on FinTech firms to act as those intermediaries. “It’s already happening in the consumer space but hasn't really happened in the UK, or in b2b, yet,” he says.
“The bank industry is the same as the airline industry was 20 years ago. There will be big FinTech and big banks in the same way as there is BA and Easyjet in airlines now,” Gelis points out.
After the next billion, plans for overseas expansion though tentative, could be on the horizon for 2016, though nothing has yet been decided says Gelis.
Europe will remain the key focus, but Gelis says the US and Singapore would be the sensible locations to look towards. “When you are a tech company it’s always the US. It’s big and there are VCs, and if you succeed there you can be successful globally. In Asia, Singapore is the right place to be.”
As the FinTech space hots up, so does competition. Transferwise, one of London’s most well known FinTech successes also in the money transfer business, isn't a worry for Kantox though. “They are doing an amazing job, we don't consider ourselves competitors. They are focused on consumes, but not really on mid-size and larger business, where we are only business focused.”
And one business using Kantox puts it plainly. It’s a no-brainer says Ignacio Sanchez, the global treasurer and risk manager at international shopfitter HMY Group, who estimates it is saving around €300 to €400 on every small transaction it makes.
“As the treasurer of a global company, it’s vital that I take measures to protect us from unprecedented currency swings, in order to defend HMY Group’s profit margins, especially during the ongoing economic uncertainty of the Eurozone,” says Sanchez.
“The online process is simpler and more customer-centric than dealing with the banks. With so many alternative non-bank solutions on the market today, banks are no longer the first port of call for global treasurers like myself,” he adds.