Alpha Group: History, Culture & International Expansion

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Shifting towards the culture aspect, which we discussed earlier, you mentioned the typical client portfolio consists of clients with revenues between 20 million to 200 million. Are there any other common traits when you look across the client base, such as financial characteristics?

All clients have a maximum credit facility that Alpha is willing to offer. Even for the best clients, you don't want to have too big a concentration. There's always a risk of fraud, and you wouldn't want to enter into huge trades and then suffer a massive loss if a client defaulted. Take a Valerie Patisserie situation; however good your credit control process is, there is always that risk that there could be fraud at the client. It's essential to consider what the client wants to do, how you can support them, and the credit facility you're prepared to offer based on their requirements. Alpha often turns away business when they're not comfortable with the amount of trade a client wants to do, which is crucial for maintaining a less risky business profile.

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When considering growth on the client side., the last annual report mentioned around 1,040 clients on the FX side. Given your experience, you've established that the product, service level, and technology are factors that set Alpha apart from banks with legacy systems. What other factors have driven client growth? Were these clients who had done FX on their own and are now looking to outsource, or were they clients of competitors like Argentex seeking a different provider?

As we expand into Europe, it's interesting to see the different dynamics in various countries. For example, the Spanish and Italians may be more inclined to gamble, making it harder for them to understand the concept of a disciplined program. They might be more interested in riskier option products, which may not always be appropriate. On the other hand, the Netherlands and Germany have been significant markets for Alpha because their risk-averse nature makes it easier for them to understand the concept. The sales process can be smoother due to the country's dynamics. This has been an interesting observation over the last two to three years, which we didn't expect when we started our European expansion.

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Regarding switching costs, how difficult is it for a client to switch from one service provider to another? I'm trying to understand how sticky the relationships are.

Sometimes, if a client grows quickly, it might be appropriate for them to have more than one FX provider. In such cases, Alpha may not have the credit appetite to cover all their exposure, so the client may bring in another provider. Changing FX providers is relatively easy, with the main barrier being the compliance onboarding and adherence to KYC rules. As a regulated firm with the FCA, Alpha ensures that all rules and procedures are properly followed. The onboarding process can take a couple of weeks, while competitors might take longer.

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