What were the origins of RationalFX and why did you want to start the business?
My family came to the UK in 1972 with just £50. That was the amount of money they were permitted to bring with them from Uganda. I was born into an entrepreneurial family and, from a young age, I said I wanted to run my own business – I have always been very determined – but I didn’t know exactly what.
I graduated from university in 2004 with a degree in marketing and computer science. At 23, I got a job at a foreign exchange brokerage firm in the City of London. It became clear to me that the industry was ripe for a shakeup. The business I joined had no online platform, for example, and the process of transferring money was quite clunky. So after a year, my business partner Rajesh Agrawal [who was recently appointed deputy mayor of London for business by Sadiq Khan] and I decided to set up on our own.
Foreign exchange sounds like a complicated business to start. Was it?
No, not really – at least not at the time. We moved to Brighton and started with just a phone and a laptop, but no money at all. At the time, in 2005, the industry was not well regulated and the barriers to entry were low.
The hardest part was convincing a bank to provide us with foreign exchange at a wholesale rate so we could offer customers a good deal. We had to convince a finance provider that we were the real deal and could benefit it, despite the fact we were a startup with no reputation in the market.
But the service we offered was a win-win and not a threat to the bank’s business. We knew large banks don’t want to have to manage lots of small transactions, so it made sense for us to handle all the admin of these trades. Then they would just deal with us as one big customer.
So we weren’t taking trade away from them, but making life easier. We were offering to boost their business by acting as a trade aggregator. Despite this, we had a lot of meetings and were turned away many times before finally a bank agreed to work with us.
Is it still possible to start a business in this way today?
It’s possible, but it would be a lot harder. In 2005, the only regulator in our industry was HM Revenue and Customs and it essentially just wanted to know that we weren’t money laundering. The FSA [Financial Services Authority] – now the FCA [Financial Conduct Authority] – started regulating the industry in 2009, which means you now need a licence to open a foreign exchange business and the process is a lot more convoluted.
How did you improve on the existing market offering?
We had low overheads compared with the average bank, which obviously forked out for multiple premises, staff, utilities and other costs. So we could work on a low-margin, high-volume model, making lots of trades and taking a tiny slice of money each time. It’s a volume-driven business. The benefit was passed onto consumers in a better exchange rate.
How did you attract your first customers?
We got on the phone. We created a series of affiliate partnerships with companies that used foreign exchange. Take, for example, an estate agent in Spain selling holiday properties to Brits: their customers would pay for properties in euros and so would need to convert the money from pounds before paying. If the customer could do that cheaply, given that they would be converting a large amount of money, that would be a major benefit to both the estate agent, who could offer the service as a value-add, and the customer who would save money.
Being cheaper than our rivals was obviously important. We were so lean that we could keep our margins wafer-thin. But also we could give better communication about when the money would be arriving.
After the initial set-up phase, word of mouth became a big factor in the way our business grew. Even now, about 60% of our business comes from recommendations.
What does the business look like today?
Last year we grew 75% and turned over about £1.3bn. That equates to about £9.1m of revenue going into the business. We employ 100 people and are set to grow our turnover by 70%-80% again this year. Growth has been fast and we’re well placed to continue that in the future.
Is there anything you wish you had done differently?
I don’t have any regrets, but perhaps I need to take some time for mindfulness. I know that over the years I have become a little stressed and worried when things have got difficult but I think this is to do with ambition kicking in, not being satisfied and continually driving for bigger and better goals. There isn’t time to relax [as an entrepreneur], especially in the industry I am in. If you take your foot off the pedal, you pave the way for your competitors to get in front.
Has the UK’s decision to leave the EU affected your business?
We use our FCA licence [as a] passport into the EU, which allows us to service businesses and private customers there. Using that licence, we can also open bank accounts across Europe, so customers can make payments into them. We also employ a lot of people from Europe, particularly those with languages in our target markets.
There’s a chance this situation will change and the business will face challenges as a result. If so, we would consider a move to Dublin to continue with a licence that allows us to trade within the EU from there. This is a problem that many in our industry will be mulling over right now.
What’s your advice to fledgling entrepreneurs?
Be prepared to take risks. It’s part of what it takes to become successful, so you must commit and persevere. Don’t wait too long for the perfect opportunity to start your business, however, because you could be waiting forever.
When a good opportunity comes your way grab it with both hands. Don’t worry about being perfectly prepared because you’ll learn a lot along the way.
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