Some recent news out of the United Kingdom has raised some difficult questions for the FX market, but ones that can be solved. According to Finance Magnates, the UK Gambling Commission (UKGC) said that as of the 14th of April people will be banned from using credit cards to place bets in Britain, in an attempt to curb problem gambling.
Although this was a development in the gambling sector, the UK’s retail forex and contracts for difference (CFD) trading sectors are linked, which according to some people within the industry including former GKFX CEO, Rod Martenstyn, to forecast that the Financial Conduct Authority (FCA) might soon do the same.
The issue of restrictions on credit cards is not something new in the spot FX space, as US-registered brokers have experienced these restrictions some years ago. Nonetheless, the availability of quick and cheap alternative payment/funding solutions, namely ACH transfers between US based bank accounts allowed brokers to alleviate the possible shortfalls by introducing new and efficient funding methods.
When speaking about the UK and its traders the question remains open, as no such ACH transfers exist in that banking system. At the same time, fintech companies such as Revolut are providing fast and seemingly cheap payment solutions to UK residents, which may provide an alternative to credit cards if they are indeed banned for funding FX trading accounts. One thing is certain – brokers’ finance departments should begin to look for alternative payment solutions for their customers, as CFD trading is regarded at highly risky by the regulatory authorities and the chances of a ban being put in place for FX are higher than we may think.