Currency Cloud, as it is called, is among a number of recent entrants into the growing, technology-based field of businesses that seek to provide better, more transparent and less expensive currency transaction services than existing players, such as banks.
However, company executives stress that they are significantly different from many of the other new and recent FX market entrants, in that Currency Cloud is more wholesale in the service that it offers, and defies easy classification. Says company director of marketing Nasir Zubairi: “There really isn’t anyone else who does what we do.”
The service went live about a year ago, and now has around 250,000 corporate and retail customers through a little more than 100 wholesale clients and “partner channels”, according to Zubairi. By partner channels, Zubairi says he is referring to “complimentary routes to market”, such as accountancy firms that make use of the Currency Cloud’s capabilities to make their own offering better, but which are themselves not a Currency Cloud client.
Perhaps most importantly, given its start-up status, Currency Cloud has already received the attention – and investments – of a number of important financial backers, to the tune of around £5.7m thus far, and is looking to break even and start making a profit by the end of 2013.
These backers include such venture capital entities as Anthemis Group, Atlas Ventures, Notion Capital, and, as of last month, XAnge Private Equity, the investment arm of La Poste, the French postal service. (XAnge managing director Herve Schricke has joined the Currency Cloud board.)
‘Tech and FX market knowledge’
“We think our offering is unique, and for this reason we see Currency Cloud doing extremely well, and transforming the business [of currency exchange] with our combination of technology and market knowledge,” Currency Cloud chief executive Michael Laven says, adding that he brought the technology know-how to the business, while Nigel Verdon, the company’s France-based chairman, contributed the FX industry know-how.
(In addition to having worked for Dresdner Kleinwort Investment Bank, Verdon co-founded and sold Evolution Consulting, a firm specialising in advising businesses on financial market technology and strategy.)
“What makes Currency Cloud different from other FX firms is that we enable a whole range of firms, like financial advisers, fiduciaries and treasury management firms, to provide foreign exchange and conversion services to their customers in a way that is automated and simple,” Laven adds.
A native of San Francisco, Laven came to Currency Cloud about 12 months ago, after more than 25 years in the business of running financial technology companies, most recently as chief operating officer of Traiana, a subsidiary of ICAP Plc.
Cloud formation
The origins of Currency Cloud date back to 2009, when it evolved out of an earlier and still existing business involved in the electronic buying and selling of international currencies on behalf of clients, FX Capital Securities.
FX Capital, which still exists, is a broker that delivers international payments services directly to corporate clients and became a Currency Cloud client after its founders realised they could spin off and market their technology platform as a separate service.
Links between the two companies remain; Currency Cloud chairman Verdon, for example, is also chief executive of FX Capital, which he also was instrumental in founding.
‘White label service’ for advisers
Zubairi says Currency Cloud’s key attractions for financial advisers with international and expat clients is its combination of competitively-priced currency trading rates with its ability to set up a white-label currency automated foreign exchange system that enables these IFAS to make and receive payments in as many as 140 currencies.
At the moment Currency Cloud has just four wealth manager and advisory clients, but he believes more will sign up as Currency Cloud becomes better known.
“Although it is beginning to change, for the most part the business of making cross-border currency transactions is still a highly manual and archaic business, rooted in the correspondent banking model developed in the 1970s," he says.
“A lot of banks still require you to fill in a form, with pen and paper, to send money, and you need to provide a lot of information each time, such as IBAN [international bank account number] and BIC [bank identifier code] numbers, addresses and so forth, which provides a lot of scope for error – which sometimes in fact do occur."
As for price, Zubairi notes that an advisory client wishing to send a sum of money to France from the UK in order to buy a property would pay around 0.5% using Currency Cloud’s white label service, compared to 3% to 4% if they used a high street bank, or 2% through Paypal.
Increasingly visible sector
In just in the last few months, a number of publications, including The Financial Times, The Economist and The Wall Street Journal , have carried major stories about what they describe as a boom in high-tech start-ups that have targeted the cross-border currency-transfer market. These mentioned Currency Cloud as well as such other FX newbies as Xoom, out of San Francisco; Dublin-based CurrencyFair; Palo Alto, California-based m-Via; and London-based TransferWise.
While most of these seem to operate from a similar starting point – that technology can enable them to compete nimbly with the industry’s large, established operators, such as Western Union and banks – Zubairi maintains that CC is different in that it is a “back office” player rather than targeting corporate and consumers directly.
“These guys are more like potential customers than competitors,” he argues.
“In fact, one of them is a client.
"What we do, unlike them, is provide the currency transaction plumbing that businesses need to deliver an international payments service to their own clients.”
