Online trading pioneer

FOR many executives, jetting off from city to city for business meetings has always been par for the course, at least before Covid-19 struck.

Such trips too are a norm for Kim Fournais, founder and chief executive officer (CEO) of online trading platform Saxo Bank - except that he also doubles as the pilot. The 54-year-old Dane holds a commercial pilot licence and clocks around 100 to 200 hours in his propeller plane every year.

"When we visit our offices across Europe, we can take the plane and my people can work on the plane. It gives us flexibility and it gives me a lot of joy as well. I love flying," he tells The Business Times (BT) via a video call from Saxo's headquarters in Copenhagen.

At the helm of the business for nearly three decades, he stresses the need to seek out fresh challenges to gain different perspectives.

"If you keep doing the same things, you will end up with a tunnel vision. I'm curious about a lot of things. I love gaining more knowledge, more experience, more skills, more adventures," says Mr Fournais, who also holds a black belt in karate.

A similar appetite for challenge and growth can be seen in his entrepreneurial journey that started in 1992.

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An engineer by training, the then 26-year-old had just entered the stockbroking scene, but made the leap to starting his own business after identifying opportunities in an industry dominated by opaque prices and constrained services.

Saxo was born in a 134 square metre office in Copenhagen, supported by an initial capital of 70,000 euros (S$111,175) scraped together by Mr Fournais and a business partner.

Their first client? The real estate agent who leased out Saxo's office space. He was looking to trade foreign exchange, Mr Fournais recalls, adding that the firm was on a three-month timeline to turn profitable.

"I managed to, despite the turmoil in the market, build confidence with a few clients. And then we started making money."

He takes pride in the firm's purely organic expansion, a route he believes not many financial institutions take these days. Even young fintechs get a sizeable amount of funding today, he observes.

"That was just not the case for us. There were no clients, there was no money. It was a lot of enthusiasm and hard work, I would say, but we focused on the same key things we do today, which is really servicing clients with the best possible product, price and service."

Saxo has evolved into a global multi-asset online brokerage with over 2,000 employees across offices in key financial centres, including Singapore, Australia, Tokyo, Hong Kong and the United Kingdom.

In 2020, a record 238,000 new active clients were onboarded globally, taking the total number of active clients to 660,000. The firm raked in more than 10 billion euros in new client assets in 2020, with total client assets surpassing 67 billion euros.

Having started out with the foreign exchange (FX) markets, Saxo's asset class coverage today spans stocks, bonds, commodities, exchange-traded funds (ETFs), mutual funds and currencies, all housed on a single platform.

Transparency

The firm's founding mission, and perhaps the bedrock for its eventual success, is to democratise investing for the masses.

The first step was to offer price and product transparency which was sorely lacking in the early 90s, says Mr Fournais. "Prices were super expensive then. It was difficult to get access to local markets . . . to different asset classes. And it was even more difficult to figure out how you could make an impact by investing in themes you believe will be part of the solution of the future."

Against this backdrop, Saxo sought to make prices upfront - and lower than its peers.

"We describe, in great detail, what is the cost of doing business with us, because of course we need to make money to deliver service. At the same time, we know we live in a competitive market where clients want a very competitive price compared to other platforms," he notes.

Saxo operates on an open architecture, pulling a wealth of investment products from banks and fund managers on its platform.

This was not the traditional way of doing things two decades ago, Mr Fournais recalls. Banks then typically invented their own investment products and sold them to clients.

He says: "You didn't really get an objective understanding of what's out there. We never wanted to be in that situation . . . we always wanted to be an open architecture.

"If a product is not doing well and, had we done it ourselves, we would most likely try to keep selling it. But we don't have that problem because we can just say, well, there are other options (on our platform)."

Pivot to digital

Can money buy happiness? To a certain extent, Mr Fournais reckons. "If you don't have a place to live . . . you don't have any financial freedom, and you're really not having a good life."

He muses over the workings of the global financial system and its fundamental role in bridging the wealth gap - nudging people towards their financial aspirations by investing in the right companies.

"Money allows us to create a win-win between people, it allows us to trade with each other. The financial system facilitates capital from those who have savings and want to invest into people starting businesses," he says.

At Saxo, technology has been critical in driving down costs and increasing efficiency, which ultimately helps facilitate greater access to the global capital markets for retail investors.

"When people trade on the phone - and that still happens at many places - you can only deal with one or two clients. On a digital platform, you can deal with millions. Of course it reduces the margins in the market," says Mr Fournais.

He points out that FX trading spreads at Saxo, for instance, have come down to as low as 0.3 basis point. This is below the industry average of around 0.7 to 1 basis point, according to checks by BT.

Separate checks found that, for the trading of Singapore stocks, Saxo charges 0.08 per cent with no minimum fee, on par with Tiger Brokers. OCBC Securities charges 0.18 per cent with a minimum fee of S$18, while HSBC charges 0.25 per cent with a minimum fee of S$25.

"It became clear that for us to grow, scale and deliver the right (solutions) to clients, we'd have to go down the digital route," says Mr Fournais. About a third of the firm's total headcount currently work in tech roles.

Though online trading platforms are now aplenty, Saxo's pivot to digital came at a time of clunky desktop computers and dial-up Internet connections.

The firm had made the bold decision to fully digitise in 1998, just six years after its founding. In Mr Fournais' words, Saxo was a fintech before the term was even coined.

"The Internet was getting more popular in the mid-90s. We saw people trading stocks online in the US, (albeit) very simplified solutions. There were no smartphones, no big flat screens - only computers that looked like big boxes. But those pixels on the screen - that was really the competitive playing field."

It was a risk that paid off, albeit not instantly. "We were clearly a little bit ahead of the curve," says Mr Fournais. It took longer than expected for people to get comfortable with trading on the Internet, and to trust in Saxo's platform based on information technology (IT).

"If we had not done that, we would not be here today," he says. "But we had hoped that it would (pick up) much faster than it did, to be honest. People then didn't really have computers. The Internet wasn't like it is today, where you have network coverage all over the world. People were not IT-savvy. They did not do money stuff on the Internet."

Staying ahead

As online trading activities continue to soar, low prices are now the bare minimum that investors expect from all providers.

A key competitive advantage now is in offering a global range of products that also cuts across multiple asset classes - something that Saxo has built up over the years thanks to its first-mover advantage, according to Mr Fournais.

"It's not that difficult just to put one or two stock markets on a digital platform. But it's very difficult to do global stocks, global fixed income, global futures and options, global foreign exchange, commodities, equities (on a single platform)."

Building up a global footprint is another key growth strategy that Saxo has been actively pursuing.

Mr Fournais shares that localising the Saxo platform in new markets is a complex and cost-intensive process, given that regulations, investor demand and risk appetite differ from country to country.

"What you see on the platform in Singapore is very different from in Denmark, Japan, Germany or Switzerland, for example. There is a lot of cost and complexity to execute this well on a global level." For instance, In Singapore, the firm has to ensure that investors can seamlessly onboard using their SingPass.

"I don't think that many high-quality online providers go beyond a single asset class, or go beyond local presence. That to me is going to be the differentiator for us," Mr Fournais reckons.

He believes that it "does not make sense" for every financial institution to try to replicate Saxo's business model, at least for now.

"Google and Microsoft are good businesses, but they're also difficult to copy. There would be few that will be really good at what they do and have the scale, expertise and business model to continue to stay ahead of the curve."

All eyes on Asia

Having established a sizeable presence in Europe, the firm is now dialling up its focus on Asia, a region set to take up a bigger chunk of its global business over the next few years.

"Asia is more dynamic than Europe which is moving much slower . . . very bureaucratic. Europe had that great period and I hope it will come back, but honestly it's not there right now," Mr Fournais shares.

The Greater China region, in particular, was identified as a key growth engine. Saxo is now 50.5 per cent owned by Chinese automaker Zhejiang Geely Holding Group.

Last April, the firm launched Saxo Fintech in China via a joint venture with Geely. Headquartered in Chongqing, Saxo Fintech aims to develop further solutions that meet the Chinese market's needs and China's regulatory requirements, as well as provide more fintech solutions for financial institutions.

"What we do in mainland China right now is really just technology partnerships," says Mr Fournais. Saxo does not have a bank licence in mainland China yet.

While there are plans to apply for one over the longer term, the firm's immediate focus is on Hong Kong, where its subsidiary is licensed and regulated by the Securities and Futures Commission.

Mr Fournais sees Hong Kong as a springboard to China amid bubbling geopolitical tensions there. While he did not disclose the breakdown of client assets in Hong Kong, he notes that growth has been good, albeit from a "very low" level.

Saxo aims to be the new alternative investment platform for investors there. "We're doing many times more business in Singapore right now than Hong Kong. Given the similarities of both markets as robust financial centres in Asia, Hong Kong has the potential to become a bigger market for Saxo and we're working hard on that," he adds.

KIM FOURNAIS

CEO and Founder Saxo Bank

1966: Born in Copenhagen

EDUCATION

1986-1989: Technical University of Denmark (Engineering)

CAREER HIGHLIGHTS

1992: Founded Saxo Bank in Copenhagen

1998: Launched Saxo's online trading platform

From 2000s: Led the global expansion of Saxo in key financial centres, including Singapore in 2007 and Hong Kong in 2011