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How to Start a Forex Brokerage

So, you’re considering starting your own Forex brokerage?

Excellent decision! The Forex market is a multi-trillion dollar industry, and there’s plenty of room for new players.

Of course, starting a Forex brokerage is not a decision to be taken lightly. There are several important factors to consider before taking the plunge. In this article, we’ll go over some of the key things you need to know about starting your own Forex brokerage.

So grab yourself a pen and paper, and let’s get started!

What is a Forex Brokerage?

A Forex brokerage is a company that facilitates the buying and selling of foreign currencies.

The company typically acts as an intermediary between buyers and sellers and makes a profit by charging a commission on each transaction.

Forex brokerages can be either online or brick-and-mortar businesses and can be domestic or international.

The Forex Market

The Forex market is the global marketplace for buying and selling foreign currencies.

It’s the largest and most liquid financial market in the world, with an average daily turnover of more than $6.6 trillion. This makes Forex an attractive investment opportunity for traders and investors of all stripes.

Launching Your Own Forex in 6 Simple Steps

Step 1: Create a Strong Business Plan

This is essential, as it will guide all of your decisions regarding your brokerage. You want to make sure your business plan is well-thought-out and realistic. It needs to include a number of things, such as your target markets, marketing strategy, operating costs, and projected profitability.

For example, if you’re targeting the EU market, you’ll need to be licensed and registered by a local regulator – a popular choice is Cyprus, which is overseen by the Cyprus Securities and Exchange Commission (CySec). Alternatively, if you’re targeting the UK market, you’ll need to be regulated by the Financial Conduct Authority (FCA). Detailing all of this in your business plan will give you a roadmap to follow as you start your brokerage.

Step 2: Brush up on the Regulations

The Forex market is heavily regulated, and you need to make sure you are compliant with all applicable regulations in the jurisdictions where you plan to operate.

This includes getting the proper licences and registrations, adhering to anti-money laundering (AML) laws, etc. If you’re unsure of what’s required in your jurisdiction, it’s best to consult with an attorney or compliance specialist.

Step 3: Find a Suitable Trading Platform

Your brokerage will need a trading platform to allow customers to buy and sell currencies. There are a number of different platforms available, so you’ll need to do some research to find the right one for your needs.

Some factors you’ll want to consider include cost, ease of use, features, and customisation options. It’s also important to make sure the platform is compatible with the regulatory requirements in your jurisdiction.

Step 4: Choose a liquidity provider

In order to make a profit, your brokerage will need to earn commissions on the trades you facilitate. To do this, you’ll need to find a liquidity provider. A liquidity provider is a financial institution that provides the capital for trades. When a customer buys or sells a currency, the trade is executed through the liquidity provider.

There are a number of different liquidity providers to choose from, so you’ll need to do some research to find the right one for your needs.

Step 5: Find a payment processing partner.

Arguably one of the most important factors in starting a Forex brokerage is finding a payment processing partner. They’ll help you open a forex merchant account, so you can start processing payments from your customers. They can also help you set up the necessary payment processing infrastructure, such as a payment gateway and a billing platform.

There are a number of different options available, so you’ll need to do some research to find the right one for your needs. Some factors that make a payment processor a good choice include:

Competitive rates
A wide range of payment methods
Security features, such as fraud protection and two-factor authentication
Ease of use

Step 6: Set up a Bank Account

You’ll need to set up a bank account for forex trading company. This is where you’ll deposit the money from your customers’ trades, and where you’ll pay out the profits.

Remember, it’s important to open an online forex trading account with a bank that’s reputable, and has experience working with other forex businesses. You’ll also want to make sure the bank can provide you with the necessary banking services, such as wire transfers and foreign currency accounts. Finally, be sure to do your research, so that you’re finding banks that offer competitive rates and fees.

Step 7: Market Your Brokerage

Once your brokerage is up and running, it’s time to start marketing it.

Online and offline marketing are both important, and you’ll need to tailor your strategy to fit your target market.

Some things you can do include:

Creating a website and online presence
Developing marketing materials, such as brochures and flyers
Participating in trade shows and other industry events
Advertising in industry publications
Networking with other industry professionals

Final Thoughts

So there you have it. These are the steps you need to take if you want to start a Forex brokerage.

Of course, this is just an overview, and there’s a lot more involved in each step.

But if you do your research and plan carefully, you’ll be well on your way to starting a successful Forex brokerage.

At Capitalixe, we specialise in helping high-risk companies obtain the latest financial technology, payment and banking solutions such as IBANs, SWIFT accounts, payment processing etc. We have a wide range of experience in the Forex market, and we can help you get your brokerage off the ground. Contact us today to learn more.

Lissele Pratt

Co-Founder of Capitalixe

What are the payment challenges facing the online gambling industry?

Online gambling has been growing exponentially in the last decade. The market is growing rapidly and according to a report by Research and Markets, it is expected to reach $72.02 billion by the end of this year, at a compound annual growth rate (CAGR) of 12.3%.In part, it is due to a fast internet connection becoming available to more people and the demand for online gaming increasing. For most of its history, online gambling was a reasonably secure environment. Still, recent developments have brought about significant changes in how people can pay for their time at the tables, slots, or sports events.

The Challenges

1 Security Issues

One of the biggest problems facing all online casinos is security issues, especially around payments. For many years ‘phishing’ was a big problem for several major casino groups, with hackers sending out emails that appeared to have come directly from the site asking for personal details including passwords, credit card information etc. These attacks were designed to steal money from accounts without raising suspicion until after it was too late. This type of security problem is still a concern as casinos have been targeted several times in recent years, but now the biggest threat comes from within. The employees of online casinos are a serious security issue with many incidences of theft either by internal staff members or ex-employees. This type of breach can cause huge damage to a casino’s reputation and players tend not to trust them again after such incidents.

2 Regulation

One major issue that operators face is regulation. Generally, gambling sites are regulated at the host country level, which means that if you want your site to accept customers from around the world, you need to get licenses from all those different jurisdictions. If you only operate within one territory, this isn’t really an issue, but it makes expansion difficult. The other side of the coin is that regulations can change very quickly, and this makes planning a business difficult.

3 Payment Options

Given that gambling has been a fairly cash-only business for a long time, finding ways to pay online was not always easy. In recent years technology has made it possible to use all the usual payment options, including credit cards, bank wires, and e-wallets such as PayPal/Alert Pay, etc. All these methods have their own pros and cons, but they work well enough for most players as long as they are reasonably secure. For those who don’t want to use traditional payments, there are newer alternative payment providers who also offer solutions. Cryptocurrency Bitcoin has become a popular payment method in the online gambling world, and there are now a number of Bitcoin casinos that offer excellent games and bonuses.

4 Currencies

Another issue that operators face is the different currencies that their players may want to use. For example, you might have customers who want to deposit and play in Euros, while others might want to use British Pounds.

This can be a problem if your site is only set up to deal with one or two currencies, as you then have to find a way to convert them. Most gambling sites now use some form of currency conversion, but it can be an expensive process so casinos are always looking for ways to reduce these costs.

5 Chargebacks

One of the biggest problems for any business that deals with payments is chargebacks. A chargeback happens when a player disputes a payment that has been made to a casino. This can be for a number of reasons, such as the player not receiving the product they paid for, the product not working or being defective, or simply that they didn’t authorize the payment in the first place. In some cases, the player may have been scammed by the casino and so will try to get their money back. The problem for casinos is that chargebacks are often difficult to fight and can be very costly. Not only do they lose the money that has been disputed, but they also lose any associated fees such as those charged by payment processors. In extreme cases, a casino can even have its license revoked if there are too many chargebacks.

6 . Fraud

Another issue that operators face is fraud. This can come in many shapes and forms, but essentially it involves someone trying to either steal other people’s details or break into the casino itself by targeting its software. There are many ways that an attacker can try to get access to other people’s data, but one of the most common is DDoS attacks, where thousands of computers are used to attack a website with traffic until it becomes overloaded and can’t function correctly. The attackers then offer to stop the attack in exchange for money. Another type of fraud includes rogue employees who may be tempted into stealing account information or installing keyloggers on players’ PCs in order to collect passwords etc. As you might imagine, this type of fraud causes huge damage to both the player and operator reputations.

7 Customer Retention

Finally, one of the biggest challenges for any business is customer retention. This is especially true in the gambling industry, where players can be very fickle and may switch sites at the drop of a hat if they are not happy with the experience. It’s therefore vitally important that casinos keep their players happy by offering good customer service, bonuses, and other promotions and by keeping the games running smoothly. If they can do this then they are likely to keep their players for a long time.

Final Thoughts

As you can see, there are a number of different payment issues that operators face when running an online gambling site. By understanding these challenges, casinos can put in place the necessary procedures and systems to reduce the risk of financial loss and reputation damage.

At Capitalixe, we aim to assist online casinos in finding reliable payment solutions that fit their needs. We’ve partnered with leading financial institutions and payment processors from all over the world, which means that we can provide access to a variety of banking options for our operators.

We constantly monitor all transactions, so you can be sure that your customers’ funds are safe and secure at all times.

Give us a call and see the difference for yourself.

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What industries are considered to be high-risk?

In the business world, risk is unavoidable. But while all businesses have some degree of it, several factors make some industries riskier than others.

Banks and financial institutions evaluate your industry and categorise it into either high, medium or low risk. If you are perceived as a business in a high-risk industry, many banks and financial institutions are likely to refuse your request to open a merchant account or to set up payment methods with them.

If banks and payment processors do choose to work with high-risk companies, they often charge them a lot more in rates and fees. Plus, these companies may have to give up a portion of their daily transactions. This is known as a rolling reserve.

So what makes an industry high-risk? And how can businesses open high-risk merchant accounts and access high-risk payment solutions if they are in this category?

High-risk merchant accounts?

A high-risk merchant is an identification by a Card Processor of a business that operates in a high-risk industry, sells products or services that experience a high level of chargebacks, is prone to fraudulent transactions, and receives stolen credit cards [1].

This means that, as well as your company’s financial health, banks and payment processors also make their decision based on the industry you operate in.

Industries that are considered high-risk

CBD Oil

CBD products are becoming legal to produce and sell worldwide after their medical benefits were discovered. Each country has different legislations around its use. For example, CBD can be consumed in the majority of EU countries. According to EU law, hemp growing and selling is permitted if the THC content is less than 0.2% [2]. Countries outside of Europe have legalised or are legalising CBD, including Canada, Russia, South Africa and the United States of America.

The main reason why this industry is considered high-risk by banks and payment processing companies is that the industry’s legislation is constantly changing. Businesses have to navigate through unclear regulations regarding how CBD can be sold in various countries. Brexit also had a massive effect on the UK market, as there are now further regulatory restrictions they must meet [3].

Gambling Industry

According to a report by Research and Markets, the online gambling industry is expected to reach $72.02 billion by the end of 2021, at a compound annual growth rate (CAGR) of 12.3% [4]. The gaming business merchants offer many different forms of gambling, including casinos, sports wagering, online poker and mobile gaming.

There are a number of reasons why this industry is considered high-risk to banks and payment processors. Firstly, a lot of online gambling businesses are based in offshore jurisdictions like Malta, Isle of Man etc. Because of this, the industry often falls victim to fraud and money laundering suspicions. There’s also a high volume turnover associated with this business, so banks are cautious about offering merchants a credit line.

Adult Entertainment

The global adult entertainment market is estimated to exceed the value of US$ 300 Bn by 2030, expanding at a CAGR of ~5% during the forecast period [5]. This includes companies that deal in toy and novelty sales and dating services, telephone services, adult and live stream services.

Many of these companies struggle to obtain a merchant account, and they need this to accept credit and debit card payments from customers and clients. This is because a lot of them are subscription-based services. This means that customers pay on a minute-by-minute basis. Banks are also sceptical about getting involved with this industry because there has been some unfortunate coverage surrounding this industry, relating to illegal activity. Because of this, many payment processors fear there will be a reputational risk associated with this industry.

Financial Institutions

Financial institutions encompass a wide range of business operations within the sector including banks, trust companies, insurance companies, brokerage firms, foreign exchange and investment dealers [6].

This industry is categorised as high-risk because working with other financial institutions requires a lot more due diligence. Payment processors need to ensure that the financial intuitions they work with strongly comply with regulations. Plus, financial institutions are much more prone to money laundering. This risk is heightened if their clients are also categorised in a high-risk industry.

Cryptocurrency

We’ve recently seen rapid adoption of cryptocurrency in many high-risk industries [7]. This year the total market of cryptocurrencies reached $2 trillion [8].

Mainstream banks are a lot more hesitant to work with crypto companies, with many unable to accept this new age style of payment method. Cryptocurrency is known for wanting to be unregulated and not tied to any government. Because of this, banks are far less likely to want to work with them. Plus, many payment service providers associate crypto with international criminal organisations and money laundering, which stops them from working with these companies.

Sign Up For Payment Processing For High-Risk Merchants

Although many banks and payment processors refuse to work with high-risk businesses, there are definitely still ways to receive a number of merchant solutions. Choosing the best high-risk merchant account is crucial, and you want to ensure that you’ve done enough research and ideally work with a company that specialises in these industries.

At Capitalixe, we bridge the gap between your business and the financial institutions you choose to operate with. We can provide several solutions, to help businesses open offshore high-risk merchant accounts, forex merchant accounts, and bank accounts for gambling businesses.

Based in London and operating internationally, Capitalixe is a payments and banking consultancy specialising in helping companies in high-risk industries obtain the latest financial technology.

Our team brings a wealth of experience and industry expertise, leveraging our network of trusted providers for the benefit of our clients. Fintech has brought a wealth of products and efficiencies to businesses and individuals – matching these opportunities to our client needs is at the core of the Capitalixe ethos.

Get in touch to set up a free and non-obligatory consultation and learn more about how we can help resolve your payment and banking challenges today.

high risk merchant merchant account payment processor

What is a Forex Brokerage?

The Forex Market

Launching Your Own Forex in 6 Simple Steps

Step 1: Create a Strong Business Plan

Step 2: Brush up on the Regulations

Step 3: Find a Suitable Trading Platform

Step 4: Choose a liquidity provider

Step 5: Find a payment processing partner.

Step 6: Set up a Bank Account

Step 7: Market Your Brokerage

Final Thoughts

The Challenges

1 Security Issues

2 Regulation

3 Payment Options

4 Currencies

5 Chargebacks

6 . Fraud

7 Customer Retention

Final Thoughts

High-risk merchant accounts?

Industries that are considered high-risk

CBD Oil

Gambling Industry

Adult Entertainment

Financial Institutions

Cryptocurrency

Sign Up For Payment Processing For High-Risk Merchants

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