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Prime Cap vs. online transfer services: How we compete


Many of the world's largest and most recognisable consumer service brands would describe themselves, in conversation if not on billboards, as 'technology' businesses.

Their online platforms and algorithms may 'connect' 'users' and 'consumers' with 'suppliers' and 'distributors'.

The service company doesn't own the thing you're buying; they're a conduit.

For that reason you could reasonably argue that they're giving you access to their network of vendors - whether that is private hire cars, houses or professional business contacts.

In some ways there has been a similar shift with foreign exchange and international payments.

Traditionally the word 'broker' means a company arranging the sale or exchange of one asset for another.

If you think about it, this is what a foreign exchange business is doing. This is also what someone like Uber is doing - they arrange the exchange|sale of your pounds for a service...

a trip home after work.

Online services like Uber & Prime Cap are far cheaper than their forebears because the purveyor does not need a high street presence. Their market is cloud based and online.

Where an Uber differs from a Prime Cap though is that they don't need (to prioritise the hiring of) staff who know the route you're taking home, they just need to directly employ people who can help you ask the question of the vendor they're connecting you with; essentially, someone else provides the expertise, they're just providing you with a connection to that person.

This is rather the case with online transfer businesses...they do not need to have an understanding of the changeable nature of one currency as it relates to another, they just need to be able to guide you through using their online system for payment entry and placing an order and, it works rather in their favour that few right minded people would be draw in to meaningful discussions about rates of exchange.

Cost, adaptability and speed of change are the main reasons why online transfer companies attract such vast amounts of investment.

With low overheads it is very easy to turn a profit provided you have sufficient number of customers converting a minimum amount of currency...and this is precisely what brokers like Prime Cap have witnessed with certain competitors like Revolut and Transferwise; personal financial services and a surge in challenger financial service institutions are 'of the moment' (rightly so), but this hasn't quite translated to optimal access for clients. It is still the case that consumers get what they are given and industry stakeholders pocket their returns.

So, to get to our point - can a more traditional broker like Prime Cap compete with this new wave of tech driven financial services business?

The answer is a resounding yes.

We can compete because, for one thing, many individuals would like someone to guide them through the markets and not just the use of an app.

Furthermore, because we have adopted many|much of the tech these companies use, we can do precisely what they can, but, we are able to overlay personalised insight too which carries significant benefits.

Prime Cap can play cloud based rivals at their own game and yet win because we have seasoned professionals to add the nuance that a platform lacks.

On a like for like basis a company like Prime Cap is able to cut its margin to offer the same, if not a better, price competition than someone like Transferwise.

We offer an easy to use low cost online platform which gives precisely the same functionality as that of the proprietary IP these companies rely on for their valuations and capital raising.

By using the skills of firms specialist in building tech platforms, we have isolated both our liabilities and our costs...which means, given the relationships we have, development of new tools becomes the cost burden of our partner and not our client.

One of the most significant differences between Prime Cap and a Transferwise is that we are courting a niche market.

We know who we know how to deal with and, although the briefs we deal in are less mainstream and therefore less conspicuous, we are not ploughing money into bill boards, pay-per-click or optimised online advertising.

We do not actually need the same volume or scale as a Transferwise. At the end of the day this can very well mean we undercut their tiny margins...our clients do not have a price tag on them the moment they step through our digital door.

Fundamentally (and here is where we get all ideological), the only difference between a Transferwise and a Prime Cap is funding...

With so much external private equity investment, TW can afford to operate at a loss for longer than an independent can. Twas ever thus; but, whether it is Starbucks, Tesco or Transferwise, volume drives down price and, in our view, quality.

Operating on such tiny margins, 'unicorn personal payment businesses' need to accumulate a base of regular clients or a vast number of one-off users and, once that base is established, they shift their model to margin cultivation, profit and investor returns.

The Cloud allows purely platform focussed business to be truly global in service and staff sourcing, so, they can out manoeuvre some of the far larger and most physically established brokers; and yet, this is their flaw:

Although in principle platform operators like Transferwise rely on much the same model as a Prime Cap, their investors have accepted TW's 10 - 15 year outlook and are prepared to wait.

We believe that this means there is an inflexible nugget at the core of their premise.

How can a business so driven by scaling cater for the nuances of particular markets?

And, wouldn't deviation from their growth model undermine investor confidence?

Their forecasts and outlook rely on attracting one profile of client. They are not really able to move with the market, nor are they able to mine certain areas that we can penetrate with our boots on the ground relationship building - to do so would mean a material change in their practises. Furthermore, without a value add and with only an on trend low cost platform to sell, how do they compete with and fend off the challengers that will come?

You might ask the same questions of Prime Cap, but, our answer is clear. We know the markets we court and we are skilled in their penetration. We offer more than just the tech and a sophisticated market will always have an appetite for a multi-channel value proposition.

Who cares how they do it so long as they do it better? This is a totally reasonable thing to ask...at the end of the day 'we care'...because their service appeals to the lowest common denominator and isn't 'better'. It is just more public. Part of their strategy is to drown out the competition. This is a clever MO, but it conditions a target market to accept whats offered and we see that as no different to what the banking sector has been able to do for the mast however long.

Prime Cap does not consider itself high brow per se, but, we do believe that expertise in the complexities of certain private client matters makes for an optimised experience and greater overall value.

Able to compete and better TW as we are, our overriding gripe with fin tech (so called), when it comes to financial services, is that as with things like law or wealth management, it removes subjective assessment of options.

A firm like TW has access to funding akin to the budgets of banks and we consider their ability to swamp a market as suppressant of choice and the enemy of meaningful and personalise value - alas, twas every thus.

#transferwise #fintech #onlineplatform #ubercurrency #unicornpayments #internationalmoney #transferbusiness #PrimeCap #PrimeCapPayments

Prime Cap Payments Limited (T/A Prime Cap | Prime Cap Payments | Prime Cap Global Payments) is registered in England and Wales No: 10755730. Registered address: 27 Old Gloucester Street, London, WC1N 3AXPrime Cap is partnered with, and a programme manager of, Ebury Partners UK Limited who provide Prime Cap's FX and payment services.  Ebury Partners UK Limited is authorised and regulated by the Financial Conduct Authority as an Electronic Money Institution (Financial Services Register No. 900797) and is registered in England and Wales (registered no. 7088713). Registered office: 3rd floor, 100 Victoria Street, Cardinal Place, London, SW1E 5JL.  Ebury Partners UK Ltd is registered with the ICO with registration numnber ZA345828.