Behaviour Analytics for Forex Brokers – Interview with Delkos Research CEO, Salvatore Buccellato

Q: Greetings Sal, thanks for taking the time to speak with us. Can you tell us how the concept of behaviour analytics has evolved and now been adopted by the FX business, given that it has been in use in the broader consumer economy, for example at large Fortune 500 firms?

A: Behavioural analytics were pioneered outside the financial services arena. Leading consumer names blazed the trail. Amazon’s recommendation engine is an excellent example of how understanding client behaviours enables a company to provide the right offers to the right customers at the right time and through the right channel — all through automation. 

Building on these innovations, financial services firms use behavioural analytics to identify retention opportunities analyzing their customers’ behavioural trading patterns to flag high-churn behaviours and automatically engage their customers.   

And a great example of this in the news is Robinhood, Revolut, and FX-specific companies such as Plus500 and IG Markets. 

These companies focus on retention and invest in targeted marketing initiatives. A review of their financials validates the impact on the bottom line. IG Markets with 55% of its revenue generated from customers aged at least three years. Plus500 Customer Churn in FY 2020 was much reduced at 30.1% (FY 2019: 64.4%), reflecting their successful customer retention efforts.

Q: Delkos Research has been in the FX market for several years now – can you tell us how the company’s products and services have changed over this time and what led to the launch of the RAZR product?

A: The company was formed in 2016 and has been at the forefront of client retention solutions ever since. The technology stack is what attracted me to this endeavour, specifically the adaptive statistical models.

The Delkos evolution can be best described as “from product to solution”. 

It’s one thing to have insight, but another thing to action insights and seamlessly integrate them into a brokers’ workflow to generate value. 

What’s unique about Delkos, though technology-driven, the path has been set with a broker perspective. Delkos knows how to implement behaviour analytics efficiently to achieve target metrics. We are in a niche industry though general behavioural analytics tools could work, with a steep and expensive learning curve for brokers, especially SMEs to gain value. 

Behaviour analytics has been the core element of the digital experience economy. Anyone who has clicked a Netflix recommendation can attest its effectiveness. The question for each broker is not whether Behaviour Analytics be a part of their strategy, but rather how it should be integrated into their strategy. I believe RAZR resolves the brokers’ challenge of effective, efficient implementation that generates value for both the customer and broker.

Q: The primary advantage of using RAZR is increased client lifetime value – can you please elaborate on how Delkos goes about achieving this specifically for FX brokers?

A: RAZR helps increase the Client Lifetime Value significantly of every existing and future customer. Technology and customer expectations have converged to propel personalization—the process of using data to customize the timing, content, and delivery. RAZR behavioural segmentation creates scalable personalized engagement at the most critical stage in the Customer Life Cycle. Implementing targeted support messaging and touchpoint strategies that deliver an outstanding customer experience inherently leads to an increase in redeposit rate, amount, and volume. Similar to the approach of Netflix, Amazon, or Robinhood. 

Q: You mentioned to us that your service can be used by FX firms of all sizes – what kind of services can smaller regional FX brokers expect to receive if they are interested in the service, but are on a tight budget?

A: We only deliver a complete solution. RAZR seamlessly integrates to the existing workflow to automate trigger behaviour based messaging, simultaneously update CRM with these insights for management, high touch markets, and templates for messaging.

Our pricing model is designed to cater to brokers of every size. The entry price allows these regional brokers a low barrier of entry. In my experience as a broker, however, the issue is rarely cost, but rather value. 

The customer base of a broker is its most valued asset, reflected by the focus on conversion and rising acquisition costs. This begs the question, how can you not maximize ROI? If you strike oil would you stop drilling before it’s empty to find the next one?  

These regional firms represent a significant growth opportunity. We will grow our business by nurturing and cultivating our customer base by increasing their business over that time. A regional firm may only have a couple of servers today, we can impact their growth, and our service will grow alongside. 

Q: RAZR is obviously a data-driven service – can firms rely on existing data they have collected to implement the RAZR solution and find trends to take action towards efficiencies right away?

A: Absolutely. We can connect to the data required, which resides in the Metatrader report server or back-office system. The implementation process is currently between three to five weeks, this means every firm has the data and the ability to take action expeditiously.

I would like to touch on the data itself. The most relevant aspect of the customer journey for every live account is their actual trading. This is why it’s the focal point of RAZR analysis. More importantly, what can be done with data that is already sitting there. The oil-well analogy kicks in again; firms are sitting on a valuable resource that needs to be drilled down to bring value to the surface 

Q: Can we also provide an example here of one piece of data that we can take and how that can be analyzed and then used for retention purposes?

A: One data point equates to a particular transaction. However, when we take multiple points that correlate to a specific behaviour it creates a retention opportunity. In this example, inconsistent position sizing reflects a customer’s struggle with understanding the product.

Their trading one lot of various instruments with the idea of taking an equal risk. Obviously, EUR/GBP vs. USD/JPY vs. EUR/USD, are entirely different. 

Now, we have identified the behaviour of Inconsistent Position Sizing. Each firm can decide how to best use this targeting information. A simple approach connecting this customer on a messaging journey to provide a position size calculator, content, or resource to assist. Which many firms have built to attract clients for conversion, however often forgotten in retention efforts. In this type of engagement, we have seen a redeposit rate increase of roughly 70% for this behaviour.

Q: Approximately how many ready models do you have in place that can be customised? 

A: Our statistical models are adaptive, regardless of size, language, region, and customer type(EA or manual). RAZR generates actionable insight into six distinct trader behaviour models.

The customization is a matter of choice for each broker in their messaging and retention processes. However, the most effective approaches fall into these categories transactional messaging, heuristics, and recommendation engine. 

Transactional messaging relates to account activity. A great customer service approach, keeping with the example of inconsistent position sizing, a journey that highlights tools and resources the firm provides that can be useful. 

In heuristic messaging, a broker wants to achieve the adoption of specific action to the behaviour. In this case, have the trader download the position calculator. You create a slight nudge – “if you subscribe or download this,” there is a benefit. That benefit can vary from as simple as you can address any position sizing issue you may be experiencing, gamification or a redeposit incentive.

The “recommendation engine” messaging can have a bit of the big brother feel. However, we are in an experience economy where the scope has moved from personas to persons. Especially, age groups 25 to 40 prefer the exchange of personal data for a unique experience. 

Keeping with the same example, an approach such as “What other traders dealing with inconsistent position size, find these resources to be most useful” can have a soothing effect in that they are not alone and conform with the day-to-day digital experiences.

A critical point lacking in broker/customer communications is distinguishing messages for manual versus algo traders. RAZR not only segments trading behaviour but further segments the type of trader. As a conservative estimate, I would say that 50% of MetaTrader users run some sort of EA. An exciting approach by one customer was to reframe analysis for EA traders.

Repurposing existing resources with minor tweaks can create a dynamic shift to have a personal and targeted experience for a diverse customer base. 

Q: What can we expect to see over the next year?

A: Speaking from a broker’s perspective, RAZR creates an exciting value proposition. All stakeholders will benefit the firm, affiliates, and, most importantly, the clients.

Expect to see the constant evolution of processes and competencies that affirms Delkos RAZR as the best of the breed. 

Salvatore, thanks very much for your time and we hope to see more updates on the use of the RAZR product among our industry’s brokers

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