Last week, the TFB team enjoyed attending the Cape Town Summit organised by Finance Magnates.
As per tradition, on our blog, we are sharing all the insights, thoughts, and trends we spotted during the event.
#1 Slow expansion into the African continent
The first thing we noticed when talking to South African (SA) brokers is their approach to entering new markets. If you look at the EU market or the APAC region, you’ll find that many brokerages are choosing an aggressive expansion strategy to secure their market share before someone else comes in and steals the show.
In SA, the situation is different. Brokers are taking a more mindful, slow-paced approach to establishing themselves in new countries. This ensures they have enough bandwidth to provide excellent services and don’t find themselves in situations where they’ve spread themselves too thin.
So while the primary focus remains on the South African market, local brokers are willing to explore other countries, with Nigeria and Kenya being the primary focus.
#2 Trader education is top priority
Investing time and resources in trader education is a well-known and highly efficient strategy to win their loyalty and secure a reliable client base. While in some markets the tides are turning, South African and African brokers, in general, are using it as the core of their business.
The focus of local trader education is not so much on theoretical aspects and basic concepts but rather on the practical application of knowledge and skills to the actual trading process. A trader’s success here equals the broker’s success more than anywhere. And it’s a two-way street as well. Traders are just as eager and excited about the learning opportunities that brokers provide.
#3 Things start to grow
For some time, SA brokers and traders have dealt with smaller deposits and trading volumes, but this is now changing. Noticeably, traders are learning and trying new approaches, making them more confident in their trading skills. Subsequently, they are ready to entrust larger sums of money to the process, and they’re choosing larger volumes per order now than they used to a couple of years ago.
Naturally, smaller-scale trading and micro lots are still in fashion, but lately, there is more diversity on that front.
#4 Regulation evolution
A trend that won’t surprise anyone is the intensified regulation, which is introducing new rules and standards to the market. Like the rest of the world, trading is becoming more regulated. It comes at a cost, but the benefits and security that brokers and traders get in return are worth it.
The South African trading industry is highly regulated, contrary to what one would expect from a developing market. Here, compliance and following regulatory rules is not something brokerages do selectively or to position themselves as boutique brokerages as opposed to the rest of the competition. This is often something you’ll see in some markets where complying is not legally binding but a matter of prestige.
Everyone in SA must have a valid licence and obey the rules. Notably, getting a local licence has proven to be more challenging than CySec, which is notorious for its complexity.
#5 Technical constraints
Throughout the event, many people highlighted the issues that brokerages have with regional payment providers (PSP). With unreliable performance, failures and glitches are not uncommon, adding disruption to the still-developing trading market.
According to experts, the issue exists on both ends. Traders are often not well-equipped, and brokerages may struggle with technology on their side, too. This creates a constraint not only for personal operations but also for trend adoption. AlgoTrading, for instance, is not well-developed in SA due to insufficient skills among many market players.
#6 Local marketing rules
In addition to technical complications, brokers must pay extra close attention to how they market themselves. While it applies to every market that businesses need to adapt to local patterns and preferences, the SA trading world takes it to the next level.
Understanding the mentality, the specifics, and the culture is paramount. Brokers are bound to fail without knowing their clients and truly recognising their needs and wants. That’s why many local brokerages shared how much effort they put into market research and activities to cater to their clientele.
#7 The crowd at the summit
One thing the TFB team noticed was the crowd at the event. All the top brokers were present, as opposed to the almost complete lack of payment and technology providers. Given the technical constraints we mentioned earlier, the presence of the backend solutions’ vendors would probably help bridge the tech gap and facilitate market growth.
Along with the brokerages, we spotted many traders, so the summit felt very balanced. Both parties could meet, discuss their expectations and available services, and sign partnership agreements. Thanks to their marketing activities, many brokers signed an impressive number of new clients, which averaged between 200 and 300 a day.
To sum up
Overall, the TFB team left the summit feeling inspired and hopeful. There is a lot of work that still needs to be done, but the African market remains one of the most promising ones around the globe. The last couple of years have seen a boom in the number of brokerages and newcomer traders willing to master the game.
The market is full of local and international brokerages, such as IFX Brokers, but there is enough room for many more to join them.
