For brokers, this means juicy material to share with their traders that could boost acquisition and ensure retention. After all, who doesn’t love the smell of volatility in the morning? Contentworks Agency works with leading brokers providing strategy, content and social media management. Here’s what brokers should be watching in Q3.
#1 Stay on Trend with Technology
Technological advancements have been transforming trading practices for some time now. But the pace of tech evolution has certainly sped up. We know that using technology to facilitate data-driven insights is key to helping traders make informed decisions. Then there are AI-based applications that are transforming the brokerage and broker-dealer functions, while alternative payment methods (APM) are facilitating simplified trader experiences. Here’s a deeper dive.
Leveraging AI for customer interactions and robo-advisory can help boost trader activity across brokerage platforms, with 75% of millennials being open to using automation tools. In fact, the global robo advisory market, which is worth $41.52 billion in 2023, is expected to grow at a CAGR of 49.2% to reach $205.84 billion in 2027. Algo trading is growing in popularity as more traders are participating in the financial markets on the side of their full-time jobs. Automated trading helps them capitalise on trading opportunities even with limited time to monitor the markets. Brokers can also capitalise on the power of AI/ML to analyse data on customer behaviour, such as past transactions, and to identify potential customers. This can drive informed decisions on customer acquisition and retention strategies and personalisation.
Globally, there are over 2.8 billion digital wallets in use and the numbers are growing with the rising use of smartphones in regions like Africa. Retail traders, who enjoy payment convenience across business interactions, expect brokers to deliver similar ease of deposit and withdrawals. This is especially true of millennials and Gen Zs, who appreciate faster and more intuitive ways of transacting online. Incorporating the latest transaction methods, such as digital wallets, on-the-fly foreign exchange and cryptocurrencies, makes a broker more accessible for younger demographics. Streamlining multi-channel payments is also essential. Giving traders the convenience to use their preferred payment method dynamically and instantly is key.
Cloud-Based Brokerage Services
The cloud services brokerage market is forecasted to grow at a CAGR of 16.09% to reach a value of $24.404 billion by 2028. Cloud-based services facilitate the delivery of seamless intermediation (for order placement associated with swaps, futures and options), service arbitrage (using third-party services, such as cloud infrastructure), workflow automation (optimising processes by automating repetitive manual tasks), integration and aggregation (for price and orders). The adoption of cloud-based infrastructure reduces hardware/software costs, simplifies services management and enhances the flexibility a brokerage can provide its traders, such as anytime, anywhere market access or order placement. Moreover, it enables self-service modes, such as using algorithms to plan trades in advance or scheduling deposits, helping traders gain more control and function independently.
The removal of MetaTrader from Apple’s App Store stirred up the proprietary trading platform market. The ban highlighted the need for a multi-platform approach. Although MetaTrader was reinstated on the App Store by March 2023, the entire experience could push the proprietary platform market to break out of the single platform mindset, so that brokers focus on providing best-in-class trading facilities to their clients.
#2 Expand into Emerging Markets
With cloud technology taking centre stage in online trading, entering new markets has been simplified. However, procuring licenses and maintaining regional compliance can be the distinguishing factor for a brokerage.
Enter Newer Territories
Economies such as the Philippines, Vietnam, Ireland, Armenia and Uzbekistan top the charts with the speed at which they are growing. As a result, wealth creation is becoming a priority and is propelling financial trading in these emerging economies. India, for instance, the fastest growing nation in Q2 2023, exhibited among the highest GDP growth in 2022 and is the second most stock-obsessed nation today. The UAE ranks fourth for the most searches for “swing trading” and fifth for “day trading.” Among the African nations, the popularity of forex trading is growing exponentially and most countries in the continent are defining regulatory frameworks to facilitate trading for citizens and attract brokers from across the globe. These are lucrative markets to enter for brokerages. Contentworks Agency has extensive experience with marketing in Africa – speak to our team to get started!
Fostering gender inclusivity is increasingly essential for brokers wanting to stay ahead of the competition. As more women enter the financial markets and take charge of their financial independence, attracting and retaining them can prove instrumental in boosting brand value. A 3-year-long UK study proved that male traders outperformed the benchmark FTSE 100 by 0.14%. But, women outperformed it by 1.94%, beating men by 1.8%. So, if women are better traders, should forex brokers target women in their marketing? We think so.
#3 Maintain Compliance
With regulatory tightening across regions, brokerages need to ensure that they remain compliant across jurisdictions. The latest EU-US disconnect with the SEC’s inaction on preventing the lapse of a “No-Action” letter on the MiFID II could impact brokers in both regions.
On the other hand, the EU is set to introduce a ban on zero-commission transactions. Although it is in the interest of making the financial markets more transparent, fair, efficient and integrated, it takes away the single most-effective selling point for a digital broker. This could mean a complete redesign of the business model. In addition, the EU is set to review the structure of the markets in financial instruments via the MiFIR Review and create a mandatory framework for consolidated tape providers (CTPs).
While US brokers may lose revenues from the EU, asset managers in Europe could be forced to relinquish access to distinguished research from America. Brokers may take one of the following actions to ensure sustainable revenues:
· Become registered investment advisors (RIAs)
· Rethink how they generate their revenues in the EU
· Pay US brokerages for research that includes both markets
All these require thorough planning and restructuring of business processes for brokers in both regions. Tighter regulations may seem restrictive, but they are likely to boost trader confidence. A reliable regulatory framework ensures traders of fund security and protection against fraud, which helps build trust in the brokerage.
#4 Embrace the Digital Economy
Traders are increasingly exploring cryptocurrencies. The high volatility of digital currencies has popularised crypto-based CFD and ETF trading, making more opportunities available for retail traders. This has garnered the attention of regulators to the crypto space.
With MiCA coming into force on June 29, 2023, regulatory bodies across the world are taking notes to design their specific crypto-management frameworks. For brokerages, this involves understanding the new space and legislations across regions they serve to meet trader requirements without compromising on compliance.
Further, central bank digital currencies (CBDCs) and stable coins are forming a more trusted class of cryptocurrencies with stronger government oversight. Brokers may consider incorporating such cryptos to remain competitive and prepared for all the diversity the digital financial space is set to embrace.
#5 Watch The Global Economic Outlook
“The world economy is softening but not collapsing, supported by a resilient United States. Inflation is declining, but frustratingly slowly, and Western central banks should remain hawkish,” say analysts at Barclays, emphasising that Q3 2023 will be a period of market consolidation.
While global growth remains similar to the previous quarter, price pressures could force the stock and bond markets to trade within ranges. This explains the diminished participatory enthusiasm among traders towards the financial markets.
While the EU fell into recession in the second quarter, the downturn in the US economy has been pushed ahead by almost 12 months. Although the US is leading the inflation decline, “a recession in the United States seems probable over the next 12-18 months,” according to Andrew Pease, the Global Head of Investment Strategy at Russell Investments.
The aggressive tightening by central banks so far has led to most economies slowing down, and the banking sector turmoil has further affected trader activity worldwide. Adequate trader education and timely market updates are key to propelling activity. The interest rate hike spree is slowing, with the US and many other nations having hit the brakes. This means that restrained liquidity will soon enter the markets. Plus, declining energy prices are lending support to an improvement in the global economic outlook. Easing inflation might be driving traders to the financial markets and brokers need to understand trader needs.
Contentworks Agency closely watches economic developments, trends and regulations to ensure strategic planning, timely communication and the positioning of instruments via digital marketing. Book a Zoom call with our marketing specialists to get your Q3 strategy off to a great start.