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Brewery triggers banking advantage

A business technology advantage lies at the core of a new age operation that owes its name to a brewery, and its success to a do-IT-yourself investment banker who saw the Branson opportunity.
And in the traditions of the world famous British businessman, OzForex’s Matt Gilmour has been recognised as an entrepreneur making the finals of the country’s most prestigious awards.
Starting at the beginning, Gilmour had other ideas in 1998 when he decided to register the name of his online foreign exchange business.
“I went to register the business name I wanted “Forex” but I was told it was not allowed because of a certain beer sold mainly in the sunshine state,” he reveals. “So I went with OzForex instead.”
Significantly, the firm started in the tech bubble era of the late 1990s. Gilmour says the business came about by applying what was going on in the financial services market at the time.
“There was a continual rise of the non banks in areas from mortgage origination to foreign exchange,” he explains. “Around the same time the internet was gaining serious momentum and I realised it would be a very efficient way to provide foreign exchange service to importers, exporters and individuals.”
This was when he saw what Richard Branson consistently sees — opportunity for a new player amidst incumbent players.
“OzForex identified an under serviced and over priced section of the foreign exchange market,”
Gilmour says. “We set about building a technology platform, obtaining appropriate licenses and establishing global banking relationships that allowed us to offer a quality service to this market segment.”
Like many entrepreneurs he found that some ‘experts’ didn’t share his vision but generally his market research confirmed he was a winner.
“There were the usual sceptics but on the whole I found people very positive about the concept when I was gathering feedback,” he recalls.
The website kicked off in 1998 and Gilmour ran it part time until he gambled by leaving his investment banking job in 2000  — just after the tech wreck! — to devote all his energy to his fledgling IT business.
And it certainly proved a sensible bet. 
OzForex has approximately 75 staff between their Sydney, London and Toronto offices. The business is a 24-hour operation between these dealing rooms. 
“Our turnover is around $6 billion per year and still growing rapidly, generated by around 50,000 clients in 40+ countries,” he says proudly. “We provide nearly a million exchange rate quotes to customers each year.”
Jack Welch, the former CEO of GE and regarded as one of the best chief executives of the 20th century, once warned that if you don’t have a competitive advantage, then don’t compete.
So, what was it that Matt Gilmour saw just over ten years ago, which has delivered the competitive advantage and the customers from his banking rivals? 
“I think our real advantage is that we blend a high quality traditional service model with a strong internet delivery platform which gives customers the best of both worlds,” he points out. “Online shopping and transacting is efficient but often a bit dry as it usually lacks any personal touch. 
In contrast, he believes the full service models can be overly reliant on people who may be engaged or on voicemail when you want to call them for a simple request. This has been a key observation that has helped deliver a competitive advantage.
“We have tried to ensure the internet platform delivers fantastic functionality and speed, but also makes customers feel that someone who knows their account is available 24-hours without a tiresome call centre style experience,” he says triumphantly.
This is a classic business that has been spawned out of the meeting of an online world with a do-it-yourself mentality generation. And this was seen at its best in Gilmour’s experience in beating the biggest obstacle to him building the business.
“The biggest obstacle was learning to program computers at the age of 30 with no prior computer expertise,” he confesses. “To minimise costs I programmed the first version of the website and the online dealing platform.
“Thankfully the systems have been expanded and completely rewritten by a team of professional programmers.”
He might have made life hard for himself in the early days with his do-IT-yourself approach but he had a business technology edge.
“I think since OzForex was born in the age of the internet, we do not have legacy systems and processes which often hinder our competitors,” he observes. “Businesses who have been successful in the past doing things a certain way find it very difficult to let go of their old ways to change in a wholesale fashion. 
“Our approach enabled us to develop new functionality and services much faster than the other players and keeps us ahead of the game.”
Today, Gilmour still competes with banks and other new players.
“Our rivals are predominately the banks,” he says. “There are some other significant players such as Travelex, but the banks still have very large market share, often because customers don’t realise how easy it is to change over to the OzForex system to get better exchange rates and lower fees.”
That’s the marketing challenge that lies ahead, however his efforts have not gone unnoticed. It has meant that he has attracted the support that all ambitious entrepreneurs need, even if they don’t know it when they start.
“I was fortunate to get Gary Lord and Kede Carboni involved with both taking stakes in the company in 2004, and they brought a wealth of experience to the business,” he says. “ And in 2007 the Macquarie Group bought a 51 per cent stake in the company, which strengthened the business further and enabled us to expand our business model to include the institutional side of the market.”
This is the kind of partner an entrepreneur courageous enough to take on the banking gorillas often needs but seldom gets. This kind of support not only brings capital and expertise but new market opportunities.
“Our alliance with Macquarie has added a new dimension to our business as we have been able to provide forex solutions to their retail clients which has proved very successful,” he explains. “And that experience can be extended to providing services to other financial institutions.” 
Gilmour says he was brought up in a family of entrepreneurs and so his recognition as the founder of one of the country’s fastest growing companies would do the family proud.
And last year he made the elite group of business leaders who were good enough to be finalists in the Ernst and Young Entrepreneur of the Year Award.
Not only that, Matt Gilmour is doing his bit for the national effort to improve our trade accounts.
“OzForex is a company that exports a service globally,” he says proudly. “Had we not undertaken this significant project our customer group would have been serviced by international banks and international foreign exchange providers. 
“We are 100 per cent Australian owned and all profits ultimately get repatriated back to Australia.”
That’s the sentiment worthy of someone who had a dream to call his company Forex but ended up learning to live with OzForex. That rejection looks like it was a lucky break.
Timeline to success
  • OzForex kicks off in 1998 but founder Matt Gilmour courageously waits for the tech bubble to burst and the stock market to crash to throw in his job as an investment banker and put the throttle down on his business.
  • He identified that the arrival of the internet and the demands of importers, exporters and individuals were being poorly catered for under the then-foreign exchange regime.
  • Equity partners join the team in 2004 to fund further growth.
  • Macquarie Bank takes 51 per cent of the company in 2007, not only providing capital and expertise but also access to new market opportunities.
  • Client base has grown to over 50,000 located in 42 countries.
  • OzForex now has offices in Sydney, London and Toronto.
  • The business currently works in 20 different currencies with plans to bump it up to 30.
  • The business now employs 75 people in the three offices.
  • OzForex finished in 5th place in the Deloitte Technology Fast 50.
  • Matt Gilmour has been identified as an up and coming, new age entrepreneur, making the final of the country’s most prestigious entrepreneur awards.

The OzForex story is a virtual blueprint for other budding business builders. Its success rests on the identification of a hole in the market and then the application of a business technology solution to create a competitive advantage. In the dreamland of entrepreneurs, the first and most coveted goal is to turn a start up operation into a publicly listed company. This has been achieved by the likes of Gerry Harvey with Harvey Norman and Graeme Wood with Wotif. The next best would be a private equity buy out for a ridiculously high price. The bronze medal in entrepreneurial goals is to find an equity partner with deep pockets. OzForex has taken bronze for the short-term but with this arrangement and big business support, the gold medal public company result might only be a number of years away. 

Published on: Saturday, February 28, 2009

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