Mind Share the key in Business FX
(16 December 2013 – Australia) The Big Four banks are losing business foreign exchange customers and market share to specialised boutique competitors such as Western Union, OzForex and AMEX.
Foreign Exchange is the most ‘banked away from home’ product, with many businesses, particularly in the Micro and SME segment, electing to execute hedging, risk management and cross border payments functions with a standalone FX provider. They report a better customer experience in addition to more competitive rates and individualised customer service.
East & Partners latest Business Foreign Exchange report presents the findings of thousands of direct interviews with the CFO’s and treasurers of businesses across Australia.
Western Union (WUBS) has surged ahead to become the largest primary provider of Spot FX products to 19.5 percent of Lower Corporates (A$20-100m annual turnover), 22.9 percent of SME’s (A$5-20m annual turnover) and 22.4 percent of Micro Businesses (A$1-5m annual turnover business customers).
The Big Four are performing markedly differently in the fight to retain Business FX market share and wallet share. In 2008 the Big Four accounted for combined Spot FX market share of 60 percent among Lower Corporates, but in the most recent research round this has dipped below 56 percent.
ANZ, CBA and NAB have achieved some success in holding off concerted challenges to their market positions across Spot FX, FX Options and Forwards products by building on product and service strengths. Westpac has however experienced a decline in overall market share. This brackets the bank with other providers failing to make headway in the face of stronger competition. Chief among these are international banks HSBC and Citi, in addition to local players Macquarie and St George.
The more ominous metric for the Big Four is deteriorating wallet share, dropping to record lows below 30 percent market wide. NAB and Westpac have posted the largest reductions, from close to 50 percent in 2008 to new lows below 30 percent in 2013.
Despite a strengthening market share position, WUBS also suffers from critically low wallet share. A mere 28.0 percent of weighted average Spot FX business is conducted by their SME customers with WUBS itself. ANZ is the most proficient at retaining Spot FX business, where in the SME segment ANZ achieves 49.6 percent wallet share. Wallet share for Business FX products has traditionally been lower than other products, yet it has reached a critically low level and continues to tumble.
How can the Big Four stem detrimental customer outflow, and what will enable specialised FX providers to continue their advance into Business FX markets?
Mind Share. Being at the forefront of CFO’s and treasurers minds for FX products is integral for securing greater market share and more importantly, wallet share.
ANZ remains the most prominent FX services provider with an average 24.6 percent first name recall overall. WUBS was suggested first for FX services by 17.8 percent of businesses overall, shifting ahead of Westpac (16.3 percent), NAB (11.6 percent) and CBA (7.0 percent).
Mind Share – FX Services
|
(% of First Names Recalled) | |||||
|
Micro Business | SME | Lower Corporate | |||
|
2010 (N: 848) |
2013 (N: 820) |
2010 (N: 641) |
2013 (N: 669) |
2010 (N: 422) |
2013 (N: 563) |
ANZ |
29.3 | 30.5 | 27.7 | 25.1 | 21.6 | 18.1 |
CBA |
4.0 | 5.4 | 3.1 | 7.5 | 1.7 | 8.0 |
NAB |
9.7 | 8.4 | 13.3 | 13.3 | 16.8 | 13.1 |
WBC |
18.3 | 18.3 | 16.0 | 17.6 | 18.7 | 13.0 |
WUBS |
16.7 | 19.8 | 18.3 | 19.9 | 10.5 | 13.7 |
OzForex |
2.6 | 4.4 | 2.2 | 3.3 | — | — |
AMEX |
3.4 | 5.0 | 2.0 | 2.5 | — | — |
Citi |
7.7 | 3.9 | 5.2 | 4.6 | 5.0 | 5.2 |
HSBC |
2.4 | 2.4 | 3.4 | 3.0 | 4.5 | 5.9 |
None |
5.4 | 0.9 | 2.3 | 0.3 | — | — |
Source: East & Partners Business Foreign Exchange Program
Martin Smith, Senior Markets Analyst, finds Australian businesses are seeking the most cost effective and well suited FX solutions for their business but continue to fall short in finding a suitable fit.
“The growing number of competitive Business FX offerings is driving businesses of all sizes to change between providers regularly. As a result overall Mind Share for the incumbent Big Four offerings is falling at the expense of emerging propositions by Western Union and OzForex”
“Customer retention in Business FX markets is of paramount importance to banks positioning themselves as full service providers. Their own primary customers are actively seeking other FX providers who are willing to deliver them the most competitive price point and customer service proposition. The make-up of Business FX markets differs significantly between segments, posing a distinct challenge to providers seeking a market leading FX product and service proposition.”
“Fostering greater Mind Share aids new customer acquisition in terms of market share, and existing customer retention in terms of wallet share, but more importantly indicates to the wider market they are cognisant of customer concerns with value for money and customer service among Business FX products including Spot FX, FX Options and FX Forwards”
About the East & Partners Business Foreign Exchange Report
This ongoing six-monthly market monitor provides benchmarks against which FX providers can measure the success of their product and service proposition for Spot FX, FX Options and FX Forwards. This standalone report addresses the FX markets across the Micro, SME and Lower Corporate segments in terms of Market Share, Wallet Share, Customer Satisfaction and Mind Share.
Business segment by annual enterprise turnover include:
- Micro Business A$1-5m annual turnover business customers
- Small to Medium Enterprises (SME) A$5-20m annual turnover business customers
- Lower Corporate A$20-100m annual turnover business customers
Released: May and November
For more information or for further interview based insights from East & Partners on the Business Foreign Exchange report, please contact:
Sian Dowling
Marcomms & Client Services
East & Partners
t: 02 9004 7848
m: 0420 583 553
e: sian.d@eastandpartners.com