Could retention techniques be banned in the UK? FCA begins investigating how firms ‘snoop’ on customers

  UPDATE: Industry professionals speak out!    Retaining existing customers is of paramount importance to FX firms, largely because it costs so much to bring new customers on board these days, and because the average lifetime value of a new customer which has little trading experience and a relatively small deposit is short. Many companies […]

 

UPDATE: Industry professionals speak out! 

 

Retaining existing customers is of paramount importance to FX firms, largely because it costs so much to bring new customers on board these days, and because the average lifetime value of a new customer which has little trading experience and a relatively small deposit is short.

Many companies in the retail FX sector realize that over 70% of deposits come from existing customers, and as a result, concentrate vast resources on retention, often by highly technologically advanced methods.

Today, the Financial Conduct Authority in Britain has begun an investigation into companies which harvest the personal data of their customers and effectively ‘snoop’ on their buying habits, lifestyles and consumer behavior – all important parameters for customer retention.

This probe by the FCA is currently being targeted toward insurance companies, however the method by which the regulator is conducting the probe could easily be transferred to all companies under the FCA’s regulatory remit.

The FCA is taking a close look at how insurance companies could use personal information shared on social media sites to put up customer premiums, stating that firms are going to great lengths to accrue massive amounts of personal data.

Many FX firms use retention tools that have been developed specifically to maximize customer lifetime value by not only engaging them further in the trading product that they use, but also by effectively harvesting consumer data and trading behavior, as well as checking which sites customers visit, profiling their buying and trading habits, and even putting a flag to the retention team when a particular customer is online and looking at related products, in order to initiate a call to solicit that particular customer for a new deposit whilst he is in ‘buying mode’.

The FCA has stated

“We are in the very early stages and at the moment the focus is on gathering as much information as possible. We are planning a market study to make sure our rules are right and fit for purpose. We are not predicting that the results will be all bad for consumers at all.”

The current inquiry will focus on how companies monitor consumer shopping habits as well as social media posts and searches, as well as the use of smartphone apps, many of which are very much focused on retention within our industry.

 

Read this next

Digital Assets

BlackRock digs further into crypto with metaverse ETF

BlackRock, the world’s largest asset manager with almost $10 trillion in AUM, is set to launch a new metaverse ETF to help investors securely monetize on the booming immersive version of the internet.

Digital Assets

Binance wins license in New Zealand as rival Huobi shutters derivatives

Binance, the world’s largest crypto exchange by traded volume, has obtained licenses to operate in New Zealand, even after rival Huobi shutdown derivatives trading last month due to concerns about regulations.

Retail FX

Hong Kong busts perpetrators of ‘ramp and dump’ scam

Hong Kong’s financial watchdog, the Securities and Futures Commission (SFC), has charged thirteen suspects of market manipulation in a joint operation with the local police.

Institutional FX

TradingView integrates market data from German Tradegate exchange

TradingView announced that it ‎has increased data coverage to allow its users to receive information from ‎and get free access to the intra-day and tick data from Tradegate Exchange.

Retail FX

Spotware Systems introduces Custom Push Notifications for cTrader mobile apps

Spotware Systems, a technology provider for the electronic trading industry, is introducing a new push notification feature to alert mobile users of price swings and market fluctuations through their cTrader app.

Market News

The Week Ahead: 30 September from David Madden, Market Analyst at Equiti Group

Sterling dominated the headlines last week, as there were concerns the UK government might struggle to service its debt.

Inside View

How does the quality of signal providers affect your business?

A must-have onboarding process for brokers with investment services like PAMM, MAM, or copy trading

Technology

DBS deploys Nasdaq Trade Surveillance

“The confidence that markets and our clients have in DBS as a safe and trusted banking group is anchored on our ability to detect and respond to anomalous activity, which in turn calls for a robust surveillance and prevention infrastructure.”

Industry News

SEC charges Justin Costello and David Ferraro for securities fraud and posing as billionaire veteran

The Securities and Exchange Commission charged Cannabis executive Justin Costello and David Ferraro, an associate of Costello’s, for promoting the stock of several microcap companies on social media without disclosing their own simultaneous stock sales as market prices rose.

<