Challenges Forex Brokers Will Face in 2024

As Europe’s leading financial services marketing agency, Contentworks Agency is aligned with the challenges facing brokers. The global financial ecosystem is rapidly transforming, driven by technology adoption, geopolitical events, shifts in economies, and the deepening penetration of cryptocurrencies. As we close in on 2024, we’re looking at the challenges brokers should prepare for.

#1 Regulatory Complexities

The banking crisis of 2023 and lingering risks of a global recession have highlighted the fragility of the capital markets. Regulators are strengthening their frameworks in a bid to regain the trust of participants. For example, the US Commodity Futures Trading Commission (CFTC) has proposed new rules that require brokers to disclose more details on their trading activities, including the number and size of trades executed, and profits/losses incurred.

The European Securities and Markets Authority (ESMA) has also introduced new regulations that limit leverage amounts offered by brokers to retail investors. This has led to many brokers reducing leverage ratios while some have even exited the European market. The UK FCA, on the other hand, has been focused on crypto regulations. The financial watchdog has implemented marketing rules for crypto service providers to ensure consumers have a solid understanding of their investments.

With the increasing penetration of cryptocurrencies, speculations regarding Central Bank Digital Currencies (CBDCs) and an emphasis on open decentralised finance, financial regulators are forced to rethink the foundational principles that drive them. Policies of larger players like the US Federal Reserve can stir up the forex market, influencing economic cycles to counter inflation. All these factors are pressuring regulatory bodies to construct flexible and robust compliance frameworks to protect the interests of all participants, including banks, NBFCs, brokerages, traders, investors and other service providers. Therefore, a major challenge in 2024 and beyond will be to prioritise and ensure compliance for uninterrupted operations.

#2 Geopolitical Disturbances

While the Russia-Ukraine and Israel-Hamas conflicts don’t seem to have an end in sight, the strained US-China relationship is also on the radar of capital market participants. This is because both economies have the potential to completely restructure the global financial landscape. Undoubtedly, geopolitical instability quickly spills over to the global financial markets, inducing volatility and increasing unpredictability. Simultaneously, the emerging Asian markets are looking for ways to minimise the domestic impact of dominant Western economies while deepening their influence on the global markets.

The pace of global developments highlights the need to provide timely market news and analysis delivered daily and presented in easy-to-understand format.

#3 Intensifying Competition

The brokerage space is expanding rapidly, with new players and newer instruments constantly shaking up the markets. Near-zero trading fees, competitive spreads and fresh tech will become the differentiators and drive innovative marketing strategies to acquire and retain traders.

Contentworks Agency Director Charlotte Day stated:

Brokers are now looking at underserved markets with high potential to drive growth. South Africa and Latin America have emerged as the most promising markets in this regard. However, there are various challenges, not the least of which are the language barriers and cultural differences. We are seeing more brokers committing to region specific marketing strategies to achieve their KPIs in the year ahead.

IBs also prove useful in an era where personal relationships and services that add value and trust are appreciated. However, great IBs are in demand and require exceptional compensation packages and a suite of marketing materials to remain loyal to a broker.

#4 Technological Evolution

As technologies continue to evolve, AI, big data and analytics will empower traders to capitalise on more opportunities than before. This may raise the demand for copy, social and algorithmic trading. Performance analytics will reside at the confluence of AI, cloud, big data and alternative data. Along with this, managing cyberthreats and real-time trading risks will increasingly become critical across sectors and businesses. Adopting robust security frameworks as sentinels to protect the trading ecosystem will be critical.

Not only are demands changing, but the trader landscape is also evolving. The global economy will be driven by strengthening consumer demand from emerging economies, new generations participating early in the markets, which will lead to changing trader/investor demographics.

#5 Energy Transition

The emphasis on cleaner and greener fuels is increasing worldwide. This is set to shift energy dominance to countries that invest in renewable sources. As we navigate between natural gas, solar, water and wind energy utilisation, currencies of oil-supplying nations will face pressures. These markets, especially natural gas, may redefine global energy trade.

Brokers can take advantage of this green focus by ensuring the availability of green investment options on their platforms. This could be by including stocks of green and sustainability-focused companies, offering information on ESG initiatives of companies available on their platform, and adding green ETFs and REITs to their list of offerings. In addition, real-time information on oil and natural gas prices, and relevant educational resources on green investing, will make a big difference. Highlighting these through content and social media marketing will help traders build the portfolio they want for 2024.

Contentworks is Europe’s leading financial services marketing agency. Book a free Zoom call to discuss marketing for your brokerage, bank or fintech in 2024.

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