The March 2002 issue of Profit & Loss carried an article entitled, “Centradia Commences Business – Quietly”. Since that soft launch (which was actually in November/December 2001), Centradia maintained this relatively low profile, but has had considerable success in both client and volume terms, to the extent that it now has more than 400 clients trading on its platform, across FX, money market and primary fixed income silos.
By its own admission, the target sector for Centradia at launch was the European “middle market”. The company often used a triangle with the middle third shaded to represent its core client base. However, according to Fabrice Mativat, CEO at Centradia, the company has extended its reach both up and down the triangle.
“Mainly, 2002 proved to us that the business model we have is working, in fact it is working beyond our expectations,” he says. “Not only do we have more than 400 clients already, they are from all segments of the market – corporate, asset manager and financial institutions.”
It is interesting that the business model is working, for the last multibank platform to rely upon a small core group of banks, Atriax, failed to sustain the model. (The four participating banks are Societe Generale, Sanpaolo IMI, Santander Central Hispano and The Royal Bank of Scotland.)
Centradia’s management believes that the differences between its offering and that of Atriax are profound, pointing out that Centradia does not sit in between the sell and buy sides as such, but rather underpins the relationship.
“Whether or not you want to lose it, multibank models elsewhere do break the relationship because [the portals] deal with both sell and buy sides. The only direct contact between the two surrounds the actual trading process,” says Mativat. “Our partner banks use Centradia as a tool within their product offering, so have a much more interactive relationship with their clients. People still talk on the phone, but they are using the platform to execute.”
The strong buy-in from the banks is driven, Centradia believes, by the fact that banks dictate their own strategy; there is no interference from Centradia. He points out that all four banks differ subtly in their application of the platform, but stresses that all are happy with it. “The numbers prove that customers are happy, therefore the marketing model is working well,” he adds.
Recipe for Success
Probably the biggest difference between Centradia and Atriax (and the other mainstream portals for that matter) is the target segment of the market. This means that unlike Atriax, which had designs on market domination, Centradia was able to launch at a relatively low cost, and provide services to a client segment that was effectively being ignored by other providers – it found the definitive niche in the market.
Reinforcing this niche, however, is a key differentiator – Centradia’s multilingual capabilities. While it is true to say that the “official” language of the markets is English, and the vast majority of market participants can cope with this, there has to be value for a company that not only allows its clients to trade in their native language, but can also demonstrate the system in that language.
This builds comfort levels much quicker, thus leading to swifter uptake and usage levels. It is often noted that the multibank platforms are simply replicating the telephone dealing process. In the case of Centradia it can be claimed that they are taking that to the next level by replicating the process in the six languages it currently supports (English, French, German, Spanish, Portuguese and Italian).
Centradia’s management believes that the multilingual aspect of Centradia’s service has had “a huge impact”, and reveals that more than 50% of usage is conducted in languages other than English. “This proves that if you give people a choice, they prefer to deal in their own language,” says Mativat.
Another key to Centradia’s success, it believes, is the successful integration of the platform into the banks’ business models. Centradia stresses the flexible technology model that has allowed the banks to use it as part of a product portfolio, not a standalone portal. The marketing model also provides value, he asserts, specifically that the banks themselves (not Centradia) are responsible for selling to their clients. Not only does this keep the costs of the portal itself down, but it gives the banks a degree of control over the distribution process – thus enabling the relationship as Centradia suggests.
Mativat also points out that the banks have used Centradia – again with the multi-lingual capabilities at the fore – as part of their marketing efforts to extend their reach in Continental Europe.
Although he is predictably coy about future developments at Centradia, Mativat does promise a more accelerated product and market expansion strategy. “We have made a lot of small enhancements to the system over the past year, primarily aimed at making it easier to use, up-to-date and providing additional statistics and tools,” he explains. “The developments that are underway now though, are much more than tinkering with the system.”
Currently the three core trading services offered by Centradia are FX and money market trading, which are auto-quoted by the banks in streaming or request for quote format, and primary fixed income. Mativat stresses that all products are being used, however the impression one gets is that the development of FX and money markets has outstripped the fixed income silo.
This is not to say the latter has not been a success, Mativat assures that it has been, but he notes that the fixed income model has a different client base. He is keen to stress the potential benefits for the banks in this, saying, “They can increase their cross-selling opportunities, because investors using the primary fixed income silo are also seeing their other services on the platform.
“Lots of banks are looking at their client relationships and many clients are reducing their number of relationship banks,” he adds. “The importance of fee-based trading is rising; our fixed income capabilities can help develop this relationship further.”
Moving outside of its geographic zone of influence is, according to Centradia, not imminent. “We are not looking actively at other regions just yet,” Mativat explains. “We do not see the need to be a global offering at this stage because the bulk of our targeted market segment sits in Europe. When the business case exists for an expansion, we will take that step. Our models are very scaleable and can be implemented very easily.”
Certainly from an outsider’s perspective, the immediate opportunity would appear to exist in Latin America, where Centradia can leverage off its language capabilities, or even in North America where a similar size client segment exists to that which has proven so successful in Europe.
Expansion plans do not necessarily include a widening number of banks either. Mativat accepts that there are banks with an interest in joining the system, especially in Europe, but he stresses that any new partner banks will have to fit the company’s model. “We are open to more banking partners, but we would evaluate any approach on its merits,” he says. “Our intention is not to have a huge number of banks, this would simply not work.”
Whichever direction Centradia decides to take in its development process, Mativat says that the key drivers have to be that they add value to the banks and their clients, and to Centradia. “We will expand with prudence and not necessarily to be revolutionary,” he notes. “We are reactive to customers which precludes us from being revolutionary. Ours is an opportunity-driven process and we understand that we are only at stage one of our road map. We still have a significant way to go to realise our ambitions.”