MONEY MOVER
The creator of the world’s first online currency trader wants the site to become as big as eBay.
Vijay Kumar has set up a business that he claims could prove to be the eBay of foreign exchange. Fx Auctions, which is based in Canary Wharf, is believed to be the first online site in the world where individuals and companies can trade currencies between themselves.
It is targeted at small businesses as well as private individuals who need foreign exchange to make a large purchase such as for imports or an overseas property.
The company claims that anyone using the site can make savings of between 1 and 3 per cent on what they would get from buying currency from a bank or money exchange broker.
Kumar believes that if the business could attract 0.1 per cent of the European Small and Medium sized Enterprise (SME) foreign currency market the business would become as big as eBay, the world’s leading internet auction site.
“It has potential for huge growth. There is a big market out there because small businesses often don’t get a good foreign currency rate from their bank unlike big companies which have the bargaining power,” he says.
“Even if small businesses can get a 0.5 per cent better exchange rate it can make a big difference to their margins, making them either more profitable or more competitive in the export market.”
The internet site works similarly to eBay auctions, bringing buyers and sellers together to bid the best price.
Auctions are only allowed for currency amounts of £10,000 or more. Those going on the site can still buy currency amounts below that level, however.
Kumar, 48, is a mathematics graduate and a chartered accountant. He got the idea for the business because he saw that internet technology provided the opportunity to bring buyers and sellers of foreign currency together without the need to pay broker commission.
“I thought for a long time that if you could enable, say, an importer selling dollars with someone buying dollars on the same day, on an eBay principle, then a substantial advantage could be gained by both parties,” he says. “It is only possible with an internet platform.”
Kumar who was working as a foreign exchange broker quit a six figure salary to launch the business last year.
He raised capital by selling investment property he held in Romford, Essex.
“It was quite a personal risk for me but I was convinced of the idea,” he says.
He has brought in experts to develop the technology for the site and now employs five people and also has 48 agents.
Kumar believes that the site could be particularly attractive to those making one-off purchases such as buying a car or an overseas property.
“Someone buying a property abroad for £100,000 could save themselves up to £1,500 on the purchase price which is quite a considerable saving. It allows ordinary people to trade at near interbank rates,” he says.
Those trading on the site are given credit limits and may be asked to pay a deposit of up to 2 per cent. They are allowed 48 hours, however, to come up with the money to complete the deal. Those needing physical cash can arrange to have it couriered.
Kumar, who is seeking venture capital to grow the business, believes the main target audience, however, will be SME companies.
“Smaller companies are often terrified of negotiating better currency rates with the bank because they are worried it might impact on some other aspect of their banking such as their overdraft limit. This is often the perception rather than the reality,” he says.
“It is the first service of its kind and we are getting a lot of interest from around the world.”
www.fxauctions.com