As Leverate restructures its operations and refocuses its product lineup, Finance Magnates sat down to talk with Kobi Gur, the firm’s CEO, and his CMO Nicc Lewis at Leverate’s offices. We got to see the 'brain' of the developer’s new offering, a service offering tailored marketing campaigns meant to increase life-time-value.
In the footsteps of the gaming industry
Following up on what he mentioned in the latest event in Cyprus, Gur explained how he sees the online trading industry changing in a way the gaming market has before. He said: “About 12 years ago the state of gaming was very similar to forex today. A lot of small companies, some medium companies and no huge companies. Regulations in a few islands that nobody really cares about and the emphasis is on churn and burn.”
Eight years ago, more meaningful countries started creating regulation. When the US banned Payments services to gambling sites the industry almost died. However, European countries followed by creating rules that mean to protect the clients and regulate not eliminate the industry. Limitations on bonuses, reporting requirements, creating advertising standards and taxation.
Similar to the situation in forex these days many clients turned to unregulated operators. “In the beginning the European regulators tried to put pressure on the wrong people - the regulated firms," said Gur. However, soon enough they started to take action against the unregulated firms, by blocking websites, putting pressure on Google not to advertise them and suing the gaming owners personally – something that is still very uncommon in unregulated forex. Similar to what we are starting to see now in forex, gaming regulators also started to cooperate across borders.
Soon enough the small operators understood that they either have to just shut down or to sell the operations to someone bigger and thus the market consolidated. Today there are just a number of large gaming groups in each major European market, a few medium sized and barely any unregulated operators. Gur thinks this will be the end state of the forex industry as well.
Missing regulations in Forex
Gur also thinks trading regulators still lack a central component in ensuring safety – validating the fairness and performance of the platforms.
He recalled how as COO at Playtech, client firms needed a sign of approval from an independent third party, decided upon by the regulator, that their platforms were up to specs. The platform developers had to adapt or completely change their offering to match the requirements, so that their clients will be allowed to stay in business. And the platforms need to be reexamined every year.
In forex this is still not the case, and Gur thinks this keeps the industry regulation immature compared to gaming.
In general, the Leverate management team are very supportive of new regulations. They think an official license is very beneficial for serious business and gave the example of running advertising on TV stations and billboards across Europe as a new avenue that opened up to gaming sites once serious regulations came into being. This makes the costs of compliance worth it for the big companies that were well capitalized enough to afford such marketing efforts.
Saturated market
Another aspect of the current forex market that the Leverate management sees as similar to gaming years ago is the lack of new clients. Lewis said that it’s rare for brokers to onboard a completely new trader these days and most clients are just moving from one firm to another. These clients know what to look for: safety of funds, good trading terms, respectable brands and licences - this benefits larger firms.
When asked if this will not hurt Leverate’s business, Gur claimed the opposite is true. He said: “I'd rather work with 10 large clients than a 100 small clients.” He explained how this reshapes the focus on the company: “For years Leverate lived off of ‘start your own brokerage’ but this market segment is going down. In the Western world brokers will merge and grow and they will need to set themselves apart – this is where we will come in.”
Leverate from now on will focus on offering large brokers ways to differentiate themselves, offer their clients more tools and earn more from each client.
Big data for big brokers
Lewis explained that unlike small brokers that can rely mostly on salespeople calling leads they got from affiliates, once you advertise on TV with a tens-of-millions advertising campaign you need automation to help you manage. “Call centers can’t hold enough workers to handle that massive volume of leads.”
Simply put, the message that Leverate delivered to us is that the old ways of doing business simply do not scale well. Big brokers must rely on technology in order to effectively reach clients.
Gur explained how he sees the role of Leverate in this market: “Everyone has the same trading platforms, tools and for the end user it is almost identical. Brokers can only differentiate on engagement.”
“For years everyone in the industry focused on optimizing turning leads to registered users, because all the analytics tools know how to calculate CPA. Very few know how to optimize life-time-value. Many tools exist in other industries that can easily be brought in to improve this. Lead enrichment, predictive dialing are simple things we brought to our clients even before technology.”
“I want to lead the trader into a funnel that ends with a deposit and trade without human intervention, as is the case now in gaming. You have to have an adaptive system that changes if the lead comes from Facebook or Google or many other aspects. Once you lead a trader in a funnel you learn a lot about him along the way.”
“How many brokers today know when a client is online? You are connected to the MT4, this is the best time to call you, but they don’t even know that. We today allow all our clients to see when a client is online and open a chat with him proactively, regardless of the system they use.”
Personalization
The new tools from Leverate also help target potential clients by detailed trading history, as a demo user that just won four trades in a row requires a different approach from one that is hesitant to open a first position. What hours of the day do you trade, on mobile or desktop, and what instruments (gold/yen…) are important aspects that can help marketing.
This makes clear to Gur that forex is lagging way behind gaming in technology: “Brokers are sitting on mountains of valuable data and have no idea how to mine it.“
Predicting when a client is going to leave, for example, can be done at 80% in the gaming industry. Knowing this is a huge advantage for a broker, and they have the information in the system and the breakdown by countries and other factors but they can’t access it. Leverate has the technology to show you this in real time and react proactively.
Behavioral economics is also used by Leverate to offer brokers another advantage when reaching out to clients. Emails for example are tailored to the situation that a trader is facing.
Personalization is achieved if someone trades XAU/AUD and a report comes out that affects this and is sent it to him, rather than irrelevant information. Advanced charts scare off new unprofessional traders and a professional trader wants a four screen system – different types of traders have different needs.
Lewis added: “The new offering is SirixActive on steroids.”
How does all this relate to the latest restructuring?
Gur explains that all brokers need to differentiate themselves but not all brokers have Sirix, so Leverate needs to be platform agnostic to reach the whole market for its new offering. As it refocuses from a Trading Platform developer to real time marketing optimizing services, not everyone on the team fitted this need or was required.
Gur said that they will always keep developing the trading platform because they have clients that use it, and because in China their former business model remains successful. However most of the firm’s focus has been shifted and “sadly we had to let go of some people.”
