Episode Transcript
[00:00:00] Speaker A: The markets, we just can't get enough of them.
[00:00:03] Speaker B: Markets are the drivers of your wealth and investment strategy.
[00:00:07] Speaker A: Welcome to Magic Markets with your co hosts, the Finance Ghost and Mohammad Nalla.
[00:00:13] Speaker B: Together we have more than 25 years of combined experience in the markets.
[00:00:18] Speaker A: You already know about the crypto arbitrage offerings at Future Forex. If you don't, refer Back to episode 170 for full details on how to avoid your annual offshore investment allowances going to waste while generating returns which have consistently outperformed the market. In this show, Harry Scherzer is back on Magic Markets to discuss their FinTech Forex offering that is currently disrupting the mainstream banks with a full suite of Forex services for individuals and companies alike. Future Forex makes international money transfers simple and cost effective. FutureForex Sapty Limited is an authorized FSP number 51884. Welcome to episode 199 of Magic Markets. Right on the cusp of episode 200. Luckily it's not a cricket game. We know we are going to get to 200 here, so that's very exciting. And you know, today we've got Harry Scherzer from Future Forex with us. And Harry, you've been with us before quite a few times actually. It's been really fun to watch your journey over the past couple of hundred shows of Magic Markets at the same time that our journey has also been so interesting. And you know, Mo's looking very sharp today. He's got a lovely shirt on. Gone are the days of the blue hoodie. This is a crisp white shirt because the man is doing an important webinar after this. Harry, you just look like an entrepreneur in a T shirt. So that, that's as expected, I guess. So welcome to both of you and I'm pretty excited as always, Harry, to tap into your knowledge and Mo to see what you've been up to.
[00:01:38] Speaker B: Indeed, Ghost. I mean, it's always exciting to have Harry on the show. I sometimes feel like we always talking to Harry at a time when, you know, markets are really doing quite well. So maybe, maybe Harry's the lucky charm here on Magic Markets. I mean, we've got close to record highs on the S and P. We've got bitcoin looking quite exciting again. We know that we generally try and talk crypto with Harry. We'll touch on that very briefly. But this week we're not really going to be focusing that much on the crypto side of things because we're talking fx, you know, that's another market that is so Vital, so important to South Africans. You know, when I was living down in South Africa, there was always this one eye on the ball in terms of what's happening globally, what's the Rand doing? And the reason for that is largely because South Africans like to diversify their risk. They like to externalize some of their capital into international markets. But the reason why we're speaking to Harry partially today as well is because we recently just did a show with Westbrook talking about New Foria, you know, the government of national unity. The Rand's done really well and so we find that this topic around FX is really quite relevant to a lot of our listeners out there. And that's part of the reason why we wanted to bring Harry on the show is just to give us some sort of outline in terms of some of the exciting things happening in that FX market. So I'm going to stop there. Harry, welcome back to Magic Markets. Always a pleasure to have you on the show.
[00:02:57] Speaker C: Yeah, thanks so much, Mo. Always lovely to chat to you and Ghost, not only because you guys are fantastic to chat to independently, but also because your listener base is really, really high quality and we've seen a lot of growth via the Magic Markets podcast and people who've heard about us who are keen to get involved in either the Arbitrage or the Forex side, having been loyal listeners to this show. So a big ups to you guys for creating such a loyal and educated fan base. And yeah, lovely to be on again.
[00:03:28] Speaker A: Harry, I've got to say I'm just really stoked that you aren't in jail because you've been winning a lot of awards recently and we know from Forbes, if you win that 30 under 30 danger zone time. I saw an article that calls it the Pipeline to Prison, which is extraordinary. Luckily, I think the South African awards don't have quite that kind of flavor, shall we say, as the US Awards, but geez, you've been a busy guy. Hey, Banking and Finance category winner in the top 40 under 40 award, a male and guardian top 200 young South African. You're one of the finalists in BCX Most Innovative Company. And you guys either have excellent PR or an excellent business or a little bit of both. I think it might be a little bit of both, but well done. It's been really great to just see that growth over the past couple of years and I think to just see how you've developed from very much a crypto arbitrage house into what you are doing now, which is bringing in more of those sort of Forex services actually living up to the future Forex name a little bit more actually. You know, and that brand is then really coming into its own now. So I think maybe let's just start there. You know, people would have heard you talk about crypto arbitrage on the show. I mean, if they haven't, then it might be worth spending literally one minute on why crypto arbitrage is still a really helpful thing to do every year and how people are generating great little returns from that. And then maybe just talking about that evolution into the forex side of the business as well.
[00:04:44] Speaker C: Yeah, thanks. Thanks, Ghost. I mean, it has been a really busy year for us and for me personally. And I think we have to thank not only our dalak in terms of the fact that the arbitrage still exists and in fact got regulated. And we're now an fsp, a casp, which is a crypto asset service provider, a Treasury outsourcing company. We've got all the regulations such that financial advisors and individuals are now really excited to get involved in this either on behalf of their clients or as a client independently. I mean, that's been really lucky on our part that the government have taken that view rather than a view of we're going to shut this thing down because we don't understand it. So that, that's been really great. But along with that, you know, we've, we've rode our luck and we have a company of exceptional individuals. We have over 90 staff now who are absolutely extraordinary in their own right and mission driven and excited to make a difference. And I think if you surround yourself with the right people, it's really proven that anything's possible. So as you say, we started with the crypto arbitrage. We still have that crypto arbitrage product alive and well, which is working like a well oiled machine quite frankly. But we've used that as a springboard to work on foreign exchange because we found that the banks in South Africa have for decades had this oligopoly where they effectively overcharge under service clients and there's been no options for clients. And so we've had enough. We kind of have said we want to be that difference that hasn't been available to clients in the past.
[00:06:12] Speaker B: Yeah, I mean, Harry, that's really part of the entire value proposition, right? It's that, you know, future Forex as a business has seen the opportunity to disrupt the industry, to disrupt some of the incumbents. And specifically when it comes to Forex, I mean, we've touched on some of these points, but it's probably worth rehashing again. You know, in South Africa, you've got effectively these oligopolies of banks. They operate primarily in the space as the key players and they might not show you the fees that they're charging in terms of, hey, you've got to actually pay this explicit fee. The way they actually take that is effectively the spread on the currency. So if you're buying, you know, dollars or if you're selling dollars into rand, they just widen that spread. And so as a result, it becomes a lot more opaque in terms of how much is a customer actually playing. And maybe if you could just touch on that point, because we know that forex markets are, they're very large, they're very liquid, but at the same time they're not as easy to access, certainly not in South Africa as, for example, equities or other asset classes. So maybe talk to us a little bit about that. What are the options for people looking at trading in Forex? And again, does Future Forex trade or are you there for customers that are effectively hedging their exposures or externalizing money into the international portfolios? Let's maybe contextualize that because I think it's important. You know, I certainly don't think future Forex is one of those trading platforms where, you know, you're in now and you're out in the next 10 minutes. Maybe talk us through that as well as the spread story and how future Forex has disrupted in that space, because I think that's really what's important to a lot of our listeners today.
[00:07:41] Speaker C: Yeah, mo, so you're 100% right. We don't do forex trading. We rather do Forex as a service. So if you're an importer or if you're an exporter or if you have any other need to move money as a business, we can assist you with that. And for individuals, as you mentioned, if you're externalizing money, if you're bringing money back into the country, we help with all of that. And where we differ from banks and other forex providers is we have transparency in our pricing, consistency in our pricing, and far better service levels where we do everything start to finish for clients, unlike banks do. And on top of that, we're far cheaper than the banks, naturally. So I think to explain, to touch on your first question around, how do spreads actually work? How does the pricing work? Well, someone in my team made a fantastic analogy. They said, think of Uber Eats when you use Uber Eats, you're paying, let's say 100 rand for your burger and they tell you that the Delivery fee is 8 rand and you think, yeah, it's 8 rand, that's not a big deal. But actually what's happening is you're paying the 8 rand delivery fee and if you went to the restaurant, you'd pay 70 rand for the burger and you're now paying 100 rand. So what's really happening is you're paying 38 rand for your burger via Uber Eats versus going to the store. And the same is true with Forex. So if we think of that delivery fee of eight grand, that's a very much explicit fee. They show it to you on your invoice. There's no hiding that. But the 30 rand is hidden. They don't tell you what it would cost if you went to the store. If we look at, if we compare this to Forex, Forex providers might tell you that it's, I don't know, a thousand rand to send your money overseas. So if you've got a million rand to send overseas, they might say, yeah, our processing fees, 1000 rand, no problem. And then when push comes to shove, they might give you a rate of 18.36 to the dollar. And you, you don't really know what to make of that. So you think, sure, no problem. You send the money, you think you've lost 1000 rand to the bank. But what's really happened is if you look on Google at the time that they gave you a rate of 18.36, the rate might have been 18 to 1. Now the difference there is 36 cents, which again, doesn't sound like a lot, but when you apply 36 cents onto 18 rand, that's 2%. 2% of a million rand is 20,000 rand. So suddenly the bank didn't charge you 1,000 rand, they charged you 21,000 rand, but only made a thousand of it explicit. And 20,000 hidden in a fee, in a spread fee, I should say, and this is something we want to change, we don't think that's fair on consumers. We don't think that you should exploit consumers lack of financial literacy or lack of full understanding in order to make the bottom line of your shareholders bigger. And this is why as FutureForex, we're going the complete opposite route. We're saying, here's the spread that's going to be charged, here's the processing fee, here's what we charge in total, here's what a bank might charge and you can See that it's far cheaper. So we're not only charging lower fees, we're also educating on how fees are typically charged.
[00:10:40] Speaker A: Yeah, it's just. People just accept it.
[00:10:42] Speaker B: Right.
[00:10:42] Speaker A: It's kind of like, well, you can't really negotiate this with your bank. You're kind of just a price taker. And whatever the price is, is what the price is. And that's exactly what you're trying to change. Right. And this applies to whether you're a business or an individual. I mean, Mo spoke to that show we had recently where we talked about what's happening with sentiment on the ground. And one of the pretty interesting pieces of feedback was that this kind of rush to maximize the offshore annual allowance every year to do investments overseas might be slowing down a bit. Which is probably fantastic news for you from a crypto arbitrage perspective, because if people are less worried about investing that money offshore and taking it away, they have more of their allowance left over for the crypto or actually, which is potentially a really, really good outcome for you. But just in general, Forex is always going to be relevant to a South African audience, whether they are actually taking money overseas or in their businesses. And I think maybe it's worth just touching on, you know, what do you see more often? Do you see a lot of individual clients who are in your crypto base, for example, using you for Forex now, or is it a lot of business clients as well starting to come through the door?
[00:11:42] Speaker C: Yeah, it's a fantastic question. And it's. And it's a bit of both. I'll say that we've had tons of businesses come through recently. We've had a lot of traction with SMEs in particular. You're looking at sort of forex values of maybe 5 million to 100 million rand per year, sometimes larger. But that's sort of our sweet spot is between the 5 and 100 million rand per year as a business. But then, as you say, our arbitrage clients now obviously use us for forex because they already know about us. They use us. But on top of that, we've noticed that our names getting out there. So sometimes we'll get clients coming to us who will say, I saw you on the Magic Markets podcast or similar. And it's been quite nice how people clearly are frustrated by the status quo. They frustrated with, I was going to use a bank's name. Let me not do that. They frustrated with one of the major banks giving them a rate and them having no power to challenge that rate. They have to be price takers, as you mentioned, Ghost, whereas the rate is unfair in the first place. And on top of that, if you need additional approvals or you need assistance with the balance of payments codes or any anything else, they're not going to provide that to you very easily. So not only are they charging a huge amount, they also do very little servicing. And we think that just needs to change implicitly, fundamentally. And so that's what we've done. And so we're seeing, we're seeing all sorts of customers coming through, individuals, businesses, you name it. And what I think is fantastic, Ghost, is if you look at our reviews on Google, you'll see how people say, I can't believe that I've been using the bank for so long when this exists. I can't. This is an absolute game changer. So we can see the real change on the ground through reviews given to us resulting in, I guess, a 4.9 rating on Google.
[00:13:26] Speaker B: Yeah, that 4.9 rating is excellent. So well done to you and the team on actually getting that. I want to cycle back just a little bit still on the spreads point. You know, I'm a numbers guy, I like to quantify some of this. You know, we've already quantified how the banks can hide some of the fee in the spread. But if you go and have a look at any forex pair, let's use for example dollar rand as an example, right. That's the most traded pair I would guess down there. What is future forex's general spread? I mean, you say you do take a spread, obviously you need to take a spread. That's just market practice. You've got to also make money. But if we were to compare, I mean if a Bank's taking a 30 cent spread, for example, where is future forex price on the spread side of things? Because I think that's important just in terms of quantifying part of the value proposition. And then this is a two parter because I also want to go back to what Ghost was saying, right, is that we're now at a very interesting juncture where sentiment on South Africa has changed. If you were to look at South Africa for the last, let's call it easily two decades, it was overwhelmingly negative. And so traffic was generally one way. It was people selling their rents, buying foreign currency, buying dollars, euros, whatever it might be, as they diversified their wealth. We also know, for example, on the business side of things, South Africa generally is an importing economy. And so you see a lot more interest on the import side. But guess what? Over the course of the last several quarters, in fact, South Africa has run a trade surplus. So this means that we're actually exporting a bit more than we're importing. So if you could maybe comment on those two things. One is what is the spread you're taking? The second one is in terms of the mix of activity between exports and imports. Have you seen any material shifts there? And how does that correlate with the change that we're seeing on sentiment evident on the ground right now?
[00:15:05] Speaker C: Yeah, two great questions, Mo. I'll start with your question around how do we price ourselves relative to the banks? Now the first thing before I answer this question is that we've positioned ourselves in such a way that our main value add is actually serviced the fact that we do everything for you as an individual or as a business. But obviously we understand that in order to win business we don't only need to do everything for you, we also need to beat the pricing. And with individuals that's where the banks sort of take the fattest margins quite frankly. And we tend to be on average about half the price of a bank. So at any given value we tend to be half the price. So you saving, you're paying twice as much at a bank and they do no servicing. The servicing is the real value add in our view. It's the fundamental value add. And then on top of that we're going to be cheaper. To make it a bit of a no brainer for businesses, the banks are slightly better priced than for individuals. And so we're able to save on average around 30% for a business. Not quite. We can't quite get to half very often, although sometimes we can because the banks are very inconsistent. Sometimes they way overcharge businesses, other times they give relatively fair amounts or relatively fair prices. But on average we're about 30% better price. But again, with businesses in particular, you effectively outsource your entire Forex function so that you can grow your business. And that's our real value add on top of the 30% reduction in pricing. Loosely. What's more important is the fact that you no longer have to fight with the bank, you no longer have to get an approval that you don't really understand how to get and work through. And that's the one that we feel makes our value add the most sort of impactful. In terms of your second question, Mo, I know that now we have a trade surplus in South Africa, which is fantastic for South Africa as a whole. But our book tends to be weighted towards importers. So our book. And on the individual front, people sending money out the country. So just because we tend to target South African companies that are using South African banks to send money out the country, it just seems to be weighted towards that. So when we look at our book, we do really well when the Rand does well because naturally that's when people are trying to pump through both as individuals, they're sending money offshore and as importers, that's when they want to settle invoices. Whereas when the Rand decreases or when the Rand weakens, even this local weakening, like a local minimum, at the moment we saw it went all the way to 17 to 1, it's now closer to 17.7. We've seen a slowdown in that period because guys are waiting for it to hit around 17 again. So there's definitely a cyclical nature to our business which revolves around how well the Rand's doing.
[00:17:39] Speaker A: So Harry, this actually takes me back to when I was at the airport. Where was I traveling to? Of course it was the Turkey trip and I needed to get my hands on some Turkish lira of all things. Not something you want to own long term because that thing depreciates even faster than the Rand. But you know, you at the airport, you've got that kind of Forex kiosk where someone sits behind and waits to basically rip you a new one on the rate that they quote you. And then you've got those little like ATM type things as well, which then quote you a rate. So I actually did the exercise. I thought to myself, okay, I wonder which one's actually going to be better value. And I imagine that the automated one, the more tech heavy one, was going to be a slightly, you know, better price because you would expect that, right? They're not paying someone to sit behind a desk. And indeed it was true. And I was actually mildly horrified at just how bad the spread was because I tried the ATM type thing first, looked at the numbers and thought, geez, this is terrible. And I thought I cancel transaction, let me walk to the desk and go and ask. And that was even worse. So that's really what it's like to actually buy Forex for so many people I think in the South African market. And that's exactly what you're trying to address. And the point is when you're doing it on a more automated, tech focused basis, I guess that helps you be even more competitive. But I think part of what you've always done as a business and we've had this feedback as well from listeners who have done the crypto arb with you as well, is that the tech is really good, but there is also a human touch sitting behind it. So I think maybe that's a good place to start to bring it to a close. It's just from your guys side on the tech side, but also that human touch. How do you do it from a Forex perspective? How do you differentiate on that service?
[00:19:07] Speaker C: Yeah, guys. So we basically replicate exactly what we did on the arbitrage side, which was combining tech where there's a dashboard for you to manage your own investment, to be fully transparent so you can see exactly where you are, how much your balance is, what you've made per trade. We match that with a dedicated relationship manager. On the arbitrage side where you've got someone to ask, someone to talk to because people trust people, right? People want to work with people and we've done exactly the same on the Forex side. We've got an online forex platform where you can book your rates, you can do everything automatically, you can upload your documents, but you've got an account manager who assists you at any time with your actual Forex needs and any questions you have and any approvals you need and it's dedicated to you, that account manager. And I think this is something that I've said for a long time, I believe that this is where fintechs abroad have gone a little bit wrong. They're fantastic companies but they've got this a bit wrong. If you look at the likes of Revolut Wise, et cetera, who we model ourselves on, based on a tech side, we absolutely model ourselves on them because we think they're fantastic, they're transparent, they far better than in my view anything that exists locally. Where they've fallen short in my view, is that if you ever have an issue there, you get put into a ticketing system and it takes an absolute age to actually get an answer if someone even understands what you want. And I believe that as a fintech you need to have the technology underpinning your entire operation. But that has to be paired with the people who can assist, who can build trust, who can help people understand what's being done. And if you have the combination, that's the winning formula that we've landed on, that makes sense.
[00:20:45] Speaker A: I think you're right about where the fintech sometimes lose their way, you know, fully digital, fully online, no human touch behind it. I'm not sure those businesses really work, you know, all that well. So, yeah, well done. I think what you've built, I mean, it's clearly working because otherwise you wouldn't have all these clients. And, you know, I think a lot of our listeners, as I said, have experienced the crypto side of what you're doing, and I think that's been a really, really cool part of the business and I would encourage them to go back and listen to those shows, you know, get a sense of the opportunity that's there. You know, maybe we'll include a throwback to one of those shows in the. In the show notes for this one. And it's going to be great to start to get feedback from people who have maybe tried the Forex side, you know, and kind of experience that for themselves. I think that'll be excellent.
[00:21:23] Speaker B: Yeah, indeed. I mean, I was just on the Future Forex website a little earlier and I mean, I. I like the whole kind of dashboard style you've got going. It's now very nice and you land on the homepage and you've got kind of the crypto arbitrage side of things. You've got the Forex side of things. So that's quite a nice, clear, clean look to that. And again, for listeners, if you want to go and find the team at Future Forex, it's www.futureforex.co.za. again, I would also encourage you, as we do with a lot of our guests, to reach out to the team at futureforex, because they are very approachable. If you have any further questions. As Harry indicated, they've now got a very large staff compliment because they're out there to try and service your needs. I'm sure someone. Harry, if someone reaches out to FutureForex, you'll definitely get someone to speak to them, talk them through the situation, talk them through any questions they might have. And I think that's so important in terms of what you're trying to achieve, which is not just disintermediating and being better on price and service, but also educating people as we go down the path. Because I think that is really what's quite vital and that's why it aligns so nicely with what we're trying to do here on Magic Markets. But unfortunately, we've run out of time. I think that's where we're going to leave it this week. Harry, is the website the best place for people to actually reach out to you and the futureforex team?
[00:22:34] Speaker C: Yeah. So you can either go to the website and fill in a contact form there, or you can email infoudutureforex Co Za either of those work. We'd love to hear from you, we'd love to engage with you. And as Mo mentioned, you're not going to get an automated reply. You'll get a reply from a human being saying, when can I give you a call? When can I email you? Can we connect on WhatsApp? And you're actually going to have someone that speaks you through everything and speaks through your independent and unique questions that you might have.
[00:23:03] Speaker B: I think that's fantastic because as a, as a fintech, you know, usually you'd expect, oh, well, maybe am I going to be speaking to an AI chatbot? And I'm glad that you're not. You're not going to be talking to an AI chatbot.
[00:23:13] Speaker A: Chatbots. Oh, no. No one needs a. No one needs a chatbot in their life. The worst invention ever. Second only to the outbound call center, honestly.
[00:23:22] Speaker B: Yeah. For our listeners, again, you now know how to reach out to Harry and the team at Future Forex. As I indicated, that's where we've got to leave it. Let us know if you've enjoyed the show. Hit us up on social media. It's at Magic Markets Pod. One word at Finance Ghost and Mohammed Nala, all on X or go and find us on LinkedIn. Pop us a note on there. We hope you've enjoyed this. Until next week, same time, same place. Thanks and cheers.
[00:23:42] Speaker A: Ciao.
[00:23:42] Speaker C: Cheers, guys.
[00:23:43] Speaker A: This podcast is for informational purposes only and is not financial or investment advice. Please speak to your personal financial advisor.
