Citi FX Vendor Survey Sees Reluctance to Switch Providers
Posted by Colin Lambert. Last updated: July 30, 2024
With The Full FX View
Citi has launched its fourth annual FX Vendor Review, which provides a view and analysis of the FX landscape, highlighting where specific venue and vendor partners can improve and meet clients demands, finding that there is a growing reluctance amongst clients to switch vendors.
Based upon what Citi says is a “robust framework and data-driven analysis”, the analysis provides insight, helping clients identify FX venues which meet connectivity requirements, ultimately improving the end client experience. This year’s review includes qualitative analysis, derived from a client survey, providing insight on the regulatory landscape, and the future of AI in FX trading.
The bank adds the review promotes vendor best practice and operational governance, underpinned by the adherence to the FX Global Code. Vendors are scored across nine criteria including functionality, connectivity, governance, stability, and customer service. The results allow the Citi FX team to partner closely with select vendors and assist in delivering clients’ priorities. “Ultimately, what we’re trying to achieve is improved connectivity, product offering, stability and how the market is operating,” explains Ayesa Latif, global head of FX products at Citi. “This will help benefit our clients, liquidity providers and all other market participants.”
This year’s survey of 120 of Citi’s most active clients revealed the majority are no longer searching for the perfect match in an FX provider, 87% were satisfied with their primary vendors, with 88% having enhancement requests, of which 52% were looking for core area improvements.
The Full FX View
There should be little surprise that FX market participants are reluctant to switch vendors, not only is this a laborious and potentially expensive process, but stories are legion of firms suffering long lag-times before the actual switch takes place, only to find the new provider has fallen from what was a leadership position to trailing the field.
Where surveys like this really help, however, is in guiding vendors and venues in their own development, making them “stickier” with clients, and this marks out Citi’s approach as being a little different. Most banks prefer to focus their efforts on meeting client demand on enhancing their proprietary services, Citi’s approach, as described in this interview, is more built upon an understanding that it shares clients with other vendors and platforms, and it can help shape those offerings.
There remains the nagging concern in anyone engaging with a new vendor or venue over the latter’s longevity – especially if they are new to the business – but if a major player like Citi is partnering with a firm a degree of comfort can be provided. This is not to say that the outcome will always be positive, but it should, in theory, enable more firms to interact with the true innovators in our industry – the fintech segment – and that can only be a good thing.
Finally, being on what could be termed an “approved list” at a major dealer, should not be grounds for complacency at those firms on it. The Full FX continues to hear of clients switching multi-dealer platforms, or at the very least adding a secondary platform, in search of a better offering. These firms need to ensure they stay at the forefront when it comes to meeting client demand, and that means proactive innovation, not a reactionary approach.
Equally, for those firms looking to build their presence by adding clients that may already be with rival offerings, the Citi client survey offers all they need to know. If you want to get new clients, having a shiny front-end or easy connectivity won’t cut it. What is wanted is workflow, workflow, workflow.
Of course, those tools need to be rolled out quickly, in two years’ time the demand could be for something completely different.
While proliferation of FX venues in the market has continued since the COVID pandemic, Citi says comparative results from the 2022 Vendor Review show a drastic drop in clients seeking new vendors, from 51% in 2022 to 19% in 2024. “This could be a result of FX execution venues quickly becoming deeply customised and integrated to clients’ internal systems,” the bank observes.
It adds, though, that while these solutions reduce manual touch points and mitigate operational risk, they may not be keeping up with client needs, leaving the client dependent on the existing technological solution. “Switching to a new vendor takes time, cost and effort, creating a risk of ‘vendor lock-in’,” the bank states. “The 2024 survey results show clients are heavily focused on existing providers improving FX management solutions, especially with workflow automation.
“The review provides some reassurance that clients are not alone in their quest for improvements and helps identify where changes may be needed if they are to remain with their provider,” Citi concludes. “The insight also helps guide their decisions, if choosing a new solution or thinking of changing vendor.”
