FX Cubic is a Turkish fintech company that builds solutions for financial brokerages. Although not known by many in the startup ecosystem, the company works with 40 banks and brokerages, generating more than 5 million transactions per month. After launching its product in Turkey, FX Cubic shifted its focus to the international market and currently generates the majority of its revenue from outside Turkey.
Ege, the founder, was my guest at the first-ever episode of Glocal Podcast. The problems for fintech startups in Turkey and how building custom solutions can hinder productization and scalability efforts is obvious. However, in this article, I’ll show how customer-specific solutions can actually be a step forward in building a scalable product, and the advantages of starting a B2B fintech business in Turkey.
Access to high-quality talent stuck at corporates
FX Cubic was started by a team of highly technical individuals, with over 20 years of financial technology experience, who have also worked on building the core infrastructure of the Istanbul Stock Exchange. Experts in the field, the team's experience working together and a wide network in the industry helped build the ideal organizational structure from the get-go.
Turkey’s financial landscape (banking, brokerage, insurance, etc) is dominated by very few players when compared to countries with older financial markets like the US. Most of these financial giants emerged over the past few decades and captured corners in highly regulated fields. While this immaturity of the market has its negatives, Turkish financial institutions have a more modern technical infrastructure and well-trained talent who’ve built it.
If the corporate has a progressive approach, it is worth the effort
Serving financial brokerages for a long time, the FX Cubic team was looking for ways to package and re-sell the custom products it developed for years. Looking to identify common customer problems and needs, the team stumbled upon a set of difficulties one of its customers was experiencing from an international solution. Ambitious to rebuild a similar product from scratch, only to replace it, the FX Cubic team doubled down on building a liquidity bridge, much similar to the Istanbul Stock Exchange backend they’ve built previously.
There is no doubt that corporate expectations and custom needs, push startups into becoming service providers, no matter how much they try to standardize their offerings. But on some rare occasions, that happens not to be the case. Depending on the corporate budget and its technical maturity, these custom solutions may actually help the startup recognize openings, envision the future of the space and get to a certain volume off of a single customer.
FX Cubic facilitates more than 5 million transactions every month and has 40 large customers. If in an oligopoly with technologically progressive players that are willing to allocate good budgets, developing custom solutions can become the first step in productizing the offering. Flexible infrastructure, smart algorithms and customizable architecture, all reflecting the advanced needs of the first customer in Turkey, differentiate FX Cubic from the international competitors.
I have heard similar patterns throughout, just like UI Path (aka DeskOver) where a company develops a solution for a large but progressive customer, gains industry experience matures its product and gets to a certain volume - only to then productize and scale.
Local market has its own limits but is an ideal test ground
FX Cubic entered an industry with very few but well-rooted players. International competitors were carelessly serving the progressive Turkish market and there was no local service provider. Building strong relations with clients with an extensive infrastructure that fulfilled complex customer requirements, thanks to the team’s technical capabilities, was FX Cubic’s strategy to dominate the local market.
Tough regulations and the conservative legal framework, make it impossible for fintech startups to go head to head with financial companies that dominate the Turkish market. However, a handful of companies, with modern tech infrastructures, fiercely competing with each other turn it into an attractive market for new-age b2b software solutions.
Avoiding regulatory hurdles and not aiming to disrupt the existing financial players, FX Cubic collaborated with banks and brokerages to dominate the shallow local market.
And then go global!
Turkey’s mature financial technology ecosystem becomes FX Cubic’s main weapon as it put together an international expansion strategy. Instead of growing in the near region, the company targeted the UK market, successfully closed its first customers and moved its headquarters to London. Turkish market lost bold as FX leverages were reduced gradually. Ege, the CEO, decided to move to London and the majority of the company’s revenues are generated by its international customers.
"Although we have the most advanced product in the market, customers still want to meet face to face and be able to reach directly when they have a problem. That’s why we will continue to recruit and build local offices in target geographies." - Ege
Satisfying the technologically matured local market, the FX Cubic team was confident that the product will impress potential international customers. Given the strict regulations in the US and London’s position as the hub for brokerages, FX Cubic decided to double down on the UK. 80% of all forex traders lose money and this pushed the EU to take regulative measures as well. Hence, a lot of brokerages started moving their headquarters outside Europe and FX Cubic will need to set up sales & marketing offices in these new locations sooner or later.
This is a trillion-dollar market
FX Cubic currently holds around 1% of the total retail forex volume around the globe. Taking into account large liquidity providers, like banks, this transaction volume is more than $5T per day! Although the forex volume seems to be shrinking, total trading volume is in an ever-growing trend. FX Cubic’s product enables the trading of any commodity like oil, gold, and even cryptocurrencies. In fact, the company started servicing cryptocurrency exchanges in 2018.
With all that transaction data that goes through its liquidity bridge, FX Cubic can accurately predict currency swings, create profit-maximizing AI-based trading tools and event become a liquidity provider for brokerages itself. Ege’s mission in the near future is to focus on scalable sales methodologies to accelerate growth and raise a large round to experiment with different business models.
All started by packaging a custom solution
Custom software solutions for large corporates can become the initial step of productization. Depending on the tech progressiveness and the budget, the startup-corporate engagement increases domain expertise, jumpstarts the business with certain revenue and develops a world-class product. Most corporates tend to kill startups, but others make them thrive.