Banks now outsource their investment products to experts and the financial sector has witnessed the rise of fintech: innovative financial services companies “really pushing the envelope” and trying to create the new solutions open banking will provide, Smith says.
Open banking in New Zealand is a system whereby customers can securely share their banking information with approved third-party providers – such as financial advisers or online stores – for specific purposes, with their consent. The aim is to allow new and innovative financial products and services to be developed.
“We’re seeing companies emerge that are providing payment solutions or offers that other companies can leverage off. CMC is also in that space [in that] we offer advanced technology,” Smith says.
He says an example is CMC is now working with ASB to “help revolutionise their trading securities business”. Clients will get a mobile trading platform with access to 15 global markets and a new web platform to trade on via the internet, plus add-on services.
“It’s a win-win for bank customers and CMC. It’s becoming more common where companies don’t have to build everything themselves.
“They can bring in experts in different fields to build a full service. Clients are now demanding that companies, such as ourselves, offer more and more products.”
Smith says cryptocurrency is an example of this demand.
“It’s becoming more mainstream ... clients demand we have that on our platform. Other companies are showing interest as well ... not so much the banks, but other trading platforms need to offer 24/7 crypto access for their clients. Or their clients will go elsewhere.
“The same can be seen in gold trading, for foreign exchange.
“Clients would prefer to have a one-stop shop than have multiple relationships with different companies.”
Smith says CMC wants to see more innovators like Sharesies in New Zealand.
“We want to see more companies pushing the boundaries and offering solutions for customers, because then that lifts the playing field for all providers. Because you can’t just sit on your existing old technology, you need to constantly evolve and improve or the clients can go anywhere.”
Smith says more and more New Zealand businesses want access to the US sharemarket.
“Seventy-five per cent of our New Zealand clients prefer the US sharemarket than any other market. It’s a trend of global access.
“Foreign exchange has always been a core part of our business, but we’ve seen gold interest double in the last year.
“We’ve also seen crypto interest double in the last year locally. Also, clients in the US market want to access extended hours of trading, where you can trade pre-market and post-market.
“So more and more companies are starting to offer longer trading hours in the US sharemarket. That’s where you can buy and sell in the pre-market – it opens four hours before the actual market.”
Smith says the past three months have been some of CMC’s strongest-performing, because of market volatility after President Donald Trump’s policy changes.
“We’ve seen some very strong months of engagement from customers. We’ve seen gold continue to hit new record highs, which has driven a doubling of interest in gold in the last year. We’ve seen more volatility in Bitcoin and the US stockmarket. CMC is a beneficiary, I guess, of all that volatility.
“Our clients are looking for a way to express their views on what’s happening.
“The New Zealand dollar continues to be one of our strongest products and there’s been a lot more movement in interest rates in the last year.”
CMC, through its 30-year-old Connect service providing online trading and investment services for banks, brokerages, family offices, hedge funds and dealing desks, has more New Zealand financial partnerships on its radar, Smith says.
It will become an NZX authorised member this year.
“It’s probably underestimated in the public domain how much working together happens within the financial services space,” Smith says.
“Because you can’t do everything yourself, you have to outsource to the experts. It’s a much more efficient way to do business.
“We’re excited about New Zealand businesses outsourcing a lot of their products. The trend is widening. You can brand up the entire website into your colours, your brand, that’s becoming more common.”
What’s driving the demand for “white-labelling”?
“I think it’s companies wanting to access more of the pie. We hear a lot about the term ‘one-stop shop’. Some of the fintech banks, certainly in the US, are trying to access all aspects of a client relationship.
“We [CMC] stick to what we do well, broking and financial services. But the fintechs want to offer insurance, they want to offer credit cards, loans, stockbroking, crypto – from one app.
“It’s a global trend that will continue for the next 10-plus years, where the big Robinhoods and the broking fintechs will try and keep adding new products to get more of the share of customers.
“It’s probably quite scary for some of the bigger firms, this challenge from the fintechs and how much they are consuming of a customer relationship. But there’s an opportunity there for customers to partner with these firms,” says Smith.
CMC was founded in 1989 by London forex trader Lord Peter Cruddas as a currency management consultant. Over the years, CMC has grown into one of the largest online trading brokers worldwide and is listed on the London Stock Exchange with a market value of $1.66b.
● CMC Markets is an advertising sponsor of the Herald‘s Capital Markets and Investment report.
