Paresh Davdra: How we turned FX on its head
Entrepreneur Paresh Davdra co-founded RationalFX back in 2005 alongside his business partner and now Deputy Mayor of London for Business, Rajesh Agrawal.
Starting off from humble beginnings in Brighton, the pair began their business journey with a phone, a computer and next to no money.
Today, RationalFX is a fintech powerhouse which turned over £1.3bn last year and is showing no signs of slowing down.
BQ caught up with Paresh to hear how they made it happen and what the future holds for the business…
Tell us about RationalFX, what does the company do?
RationalFX is a leading UK foreign exchange and international payments provider. We make it our mission to work with business and consumer clients to save them money whenever they make overseas payments. We purchase foreign exchange at a wholesale rate from banks so we can provide our clients a better deal for sending money.
Founded in 2005, we are an independent business that has grown organically over the past decade, moving from a two-person operation in Brighton to a multi-million-pound company in the heart of Canary Wharf with over 100 employees. RationalFX has transacted over £8bn to date and served over 150,000 registered clients. We turned over £1.3bn in 2016, showing 65% growth, which is expected to continue this year.
The company excels through purchasing currency in volume and passing on savings to clients, with an emphasis on services that can suit different international payment requirements. We are FCA regulated and follow stringent compliance processes to ensure we meet payment regulations. Client money goes into segregated accounts so it is completely safe.
How did the company come about? What inspired yourself and Rajesh to launch the business?
The idea for RationalFX first came to us whilst Rajesh Agrawal (co-founder and now Deputy Mayor of London for Business) and I were working together at a brokerage firm.
We felt that this market was growing and changing very quickly, and that with the way technology was progressing there was a gap in the market for an online play.
The gap in the market for RationalFX was incredibly clear – with over US$14bn worth of FX traded on a daily basis, and with London being the world’s largest FX trading centre, it seemed apparent that there was a need for an online FX service.
It was also inspired by an idea Rajesh and I had resulting from our friends’ complaints over the costs of sending money back home to India. We researched the fees money transfer companies charge and were astounded by some of the hidden costs and charges for money transfers. We felt we had to educate people on what is a good rate.
Whilst this played a part in RationalFX’s inception, this also led to the launch of Xendpay, an outcome of a mission to reduce the cost of money transfers, with the aim of benefitting many communities in the UK and globally.
Because of our friends’ protests over the costs, (not to mention some of the service issues), we eventually decided to solve the money transfer issue for good, creating the world’s first Pay-What-You-Want money transfer service, Xendpay.
What were you both doing prior to launching the company?
I grew up in Harrow, London, in a close-knit family. Whilst at university, I worked at a brokerage firm and went on to work there for a year after graduating. Ever since I can remember I wanted to run my own business.
I have to be honest, at the time I associated it all to making a lot of money and it was Rajesh that helped me mature and realise that it is more important to make a difference and become successful – money will become a bi-product of that success.
Rajesh was born and raised in India, joining a foreign exchange company in Mumbai. He quickly built a good rapport with London-based clients who, impressed with his work, invited Rajesh to work for them.
He even sold his motorbike for a one-way ticket from India in 2001 and arrived with just £200 in his pocket.
Where did you start off and how did you get the business off the ground?
Whilst at the brokerage firm, I got my first taste for foreign exchange. After a year, Rajesh and I decided to quit our jobs and move to Brighton.
We were motivated by a strong desire to educate and help our clients save money, with a superior service compared to other market competitors. We started out with as little as only one phone, one computer and no money.
Our aim was to persuade people to switch from the traditional bank route. Starting out, we identified a key customer base – the overseas property market – which provided excellent potential for growth.
With this in mind, we then chose to target overseas estate agents, who recommended us to clients in return for a small fee.
Did you encounter any challenges? How did you overcome them if so?
The hardest thing was navigating through the recession – we were becoming increasingly successful in the years leading up to it and then suddenly everything slowed down. The recession made a monumental difference to the finance industry, and taught Rajesh and I some invaluable lessons that have helped us create a more sustainable and successful business in the long term.
Specifically, the recession taught us to be smarter with our money and business investments, as one can never predict what the future may behold. Businesses should always have a ‘rainy day fund’. The recession has helped me significantly mature on both a personal and business level as a businessman.
Saying that, it is also important to maintain a balance if you want to grow your company. Remembering that growth costs money and requires risk will put you in good stead.
More recently, we have also been concerned by the uncertainty caused by Brexit. From our London office, we serve customers from across Europe and employ many people from the EU. Brexit was not the result we hoped for but our previous experiences teach us that we have to move forward with it.
On a day-to-day level, the competitive landscape of foreign exchange can be a challenging one. But we firmly believe that keeping the client at the core of the business will be the defining factor that helps RationalFX to stand ahead of its competitors and overcome these challenges.
How much has the company grown since?
We are extremely fortunate to have seen a large volume of customers in the initial days of RationalFX’s establishment. In fact, we did not expect to see market interest to hit those highs so early on, and our customer base continues to grow extremely fast to this day.
The organisation as a whole has seen exceptional growth since its inception, not only from a performance point of view, but also in terms of a broader client base and of course, internally as a team.
We grew 65% in 2016 and the year before that, we grew by 75%.
How do you think Brexit will affect not only you as a business but also the wider fin-tech sector?
Brexit is definitely a big challenge for us and the industry alike. There has been growing uncertainty over the terms of Brexit, including passporting rights – which is a big issue for us. This uncertainty has affected investor confidence in general, while also impacting investment appetite.
However, it has now become increasingly clear that the outcome depends on whether it will be a ‘soft’ or a ‘hard’ Brexit. This is even evident within the FX markets on a daily basis – whenever the government takes a particular stance towards to the EU, in most cases, the value of the pound shrinks or expands, depending on the tonality of the discussion.
Now that negotiations are off to a positive start, we expect London to maintain its crown as the FinTech hub of the world and to continue to uphold the international values it has championed over the years. We expect the speed of innovation to continue, especially within the FinTech space, where the pillars of conventional banking are being challenged daily in new ways.
We are outward looking in terms of the Brexit situation, having guarded our assets and customer base through lucrative pricing models and international reach. We have ensured a stable framework for success in the near future.
Looking forward, what are your plans for the future? How do you see the company growing?
Our foremost concern for the future is retaining and growing our client base. Keeping the final user at the core of our plans helps us sketch out a blueprint for innovative solutions that we can implement to enhance the customers’ experience.
For both RationalFX and Xendpay we have always applied strategies and techniques that have enabled our clients to attain more value from our services and we aim to continue onwards with this trend. We have also implemented technological enhancements that support our client propositions and facilitate a service that reflects our intentions. We aim to keep innovating through research and development to further enrich a money transfer experience.
We are also close to launching our innovative payments processing engine that can plug into various back office systems, effectively elevating our position to deliver a high quality of service to our clients. This system is powered by an innovative backend platform built with API’s that will allow seamless integration of currency solutions with selected partners and new FinTech players.
Over the years, we have experienced organic growth both in terms of operations, performance and talent. Our team is a group of highly motivated individuals who are very passionate about their work and ensure a world class service to our growing customer base.
We have seen large scale international interest, which has led to our expansion into European and Asian markets. Alongside RationalFX’s international growth, Xendpay is allowing more customers than ever to pay what they want for the service, with expansion into new developing markets.
Our continued investment and growth in technology has allowed for increased efficiency in our API integration and straight through processing services, enabling us to launch the business in diverse markets where competitors have failed.
Service continues to be the backbone of our business and we receive equal appeal across various cultures due to our effective forward planning and technology to meet local demands and regulations.
It’s exciting to see what’s happening in the market currently as FX payments continue to grow. As the world continues to become a smaller place with people constantly on the move, there will always be a need to move money from country to country and we aim to enrich that experience.
Published: 10 July 2017