A look at the FCA’s stab at customer retention from a marketing perspective – Inside View

Last week, FinanceFeeds reported that the Financial Conduct Authority (FCA) had begun an investigation into how firms under its regulatory jurisdiction use data in order to monitor customer activity in order that they can ‘upsell’ to existing clients.

The ability to conduct such activity is critical to the retail FX industry, mainly because of the relatively short lifetime value of clients with small deposits, the cost of acquiring new customers and the widely held assumption that 70% of deposits into retail FX firms come from existing clients.

As a result of all of these factors, retention teams play a significant part in the business of all retail FX firms, some of whom use retention tools that can research customer behavior to prompt a retention call when the customer is on certain websites in ‘buying mode’.

Just how damaging this would be to the retention practices of firms has been part of an investigation by FinanceFeeds, however from a marketing and digital point of view, these factors are of considerable importance because the marketing side of the business is at the initial leading edge, therefore would have to adapt quickly should the FCA take this pilot across all sectors.

Bart Burggraaf, Managing Partner at MediaGroup Worldwide, is an expert in this area.

Mr. Burggraaf explained to FinanceFeeds “As I understand it, its going to be fine (also going forward) for firms to use their own data to do retention.. and that’s the main way companies should be (and are) doing it.

“This includes looking at trading data on their platform, behaviors of leads/clients on their own website, behaviors of leads/clients with own company emails etc. If trading companies are pulling social media data it is mostly just for getting a more complete picture about someone (like what their profession is) but certainly not in the same way insurance companies can use this type of data, and brokers can really do without it” said Mr. Burggraaf.

FinanceFeeds understands that certain retail FX companies and binary options brands which concentrate on obtaining clients in jurisdictions where gambling is legal – such as the UK – use certain systems to check when customers are viewing poker sites and online gaming sites, so that their retention staff can call them and solicit a deposit whilst the customer is ready to ‘gamble’. This practice would be put to an end if the FCA took its plans further.

Mr. Burggraaf detailed how this would pan out “In order to do this effectively these brokers would need to have agreements with a great number of websites, or be advertising on all these sites.”

“I doubt there are many binary options brokers that have the funds to do so and I have not seen such a system being used for real time retention, however if it exists I also do not see a legal problem with it. A company is entitled to buy legal 3rd party data and certainly also to know if their ads are being viewed.” – Bart Burggraaf

“That viewership data is needed to measure the performance of the advertising anyway; without it brands cannot accurately measure the ROI of their individual advertising campaigns and again I do not see anyone forbidding collecting this data. Perhaps they should just forbid certain use cases, for instance by forbidding certain types of pressure selling or by ensuring clients have adequate liquid funds before being able to redeposit, that would be far more useful.”

“All in all I don’t think this will affect legitimate brokers much” concluded Mr. Burggraaf.

Featured photograph: FX retention department call center. Photography by Andrew Saks-McLeod