Published date: 2023/04
Did you know that in 2022, 38% of the world’s foreign exchange market turnover was traded in London? In fact, London is the largest foreign exchange hub in the world averaging around US$7 trillion per day in trading in 2022! This puts the UK and London at the very centre of global currency exchange trading and is one of the major reasons London is often referred to as the “financial capital of the world”.
Although China created the first paper money in the world dating back around 1400 years ago, the British pound sterling is the world’s oldest currency that is still in use today. And, in case you’ve ever wondered, the British pound sterling is named as such given traditionally, one British pound (£) carried the same value as one pound of sterling silver. However, while the pound sterling certainly bears the longest tradition as a currency, it is for very different reasons that London is the largest FX hub in the world.
London boasts a significant geographical advantage over the other FX superpowers; it is the only major FX hub whose trading hours cross over with the US and Asian FX hubs, meaning it is open while the Asian markets are still trading and before it closes, the US markets commence. Given world time-zones, London literally is the centre of the FX world.
Regulation and trust
Another advantage London based FinTechs have is there exists a stable regulatory environment with financial services firms overseen by the Financial Conduct Authority (FCA). The FCA is respected worldwide as a regulator which often gives FX traders a certain degree of confidence when dealing with an FCA-regulated firm in London versus firms from less well-regarded jurisdictions.
The most commonly spoken language in the world is English. When we add to this the fact that almost 90% of all currency trades worldwide involve the US dollar (including those in Europe and Asia), it really starts to become apparent why London has a competitive advantage.
With over 3,000 fintech companies operating, London can also claim to be the FinTech capital of the world. To survive in such a competitive market requires constant innovation and product improvement, meaning that London FinTechs provide some of the most pioneering currency exchange and international payments technology in the world.
Given this, companies from all over the world turn to London based providers for reliable, trustworthy and cost-effective solutions.
Why not use your bank for international payments and currency exchange?
Most UK companies still utilise a high street bank for many of their core banking requirements such as trading accounts and lending activities.
However, for some business requirements such as overseas bank-to-bank payments and currency exchange, FinTechs who specialise in these core activities may utilise superior technology to offer greater functionality and more effective business transactions, complete with competitive exchange rates.
Trading the cable
Interestingly, when the first electronic GBP/USD exchanges were traded between London and New York, these were transmitted via the transatlantic-cable; hence, the industry refers to GBP/USD trades as a “cable”.
Founded in the UK, Volopa began “trading the cable” way back in 2011, being one of the UK pioneers in the global payments and FX space. Since then, we’ve created one of the easiest-to-use and cost-effective solutions available in the UK. Features such as allowing our clients to view and utilise real-time wholesale exchange rates, same day payments in a growing number of currencies and automated recipient email notifications has proved a game-changer for many UK businesses.
“The driver behind our new international payments journey was to remove the complexity associated with international payments. Our new payments journey reduces the number of clicks required to 3 for repeat payments. With the Recipient Email feature, our clients no longer need to show their supplier any proof of payment being sent as this is automatically taken care of, making things simpler.”- Ali Albajati, Head of Product, Volopa
You can read Matt's article and further industry insights in the latest edition of The Financial Technologist. Download your free copy here.
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