Top five trends to watch out for in trading

February 27, 2023

As 2023 shapes up to be a year that demands adaptability and resilience, staying informed of key market drivers and developments could be crucial to providing the best experiences for your traders. We have identified five key trends that could make a difference for your trading company.

Greater use of alternative payment methods (APMs), tightening regional regulations and the growing importance of emerging markets are already impacting the retail trading space. While uncertainty around crypto investments might still be present, could new digital assets help the market recover? And if you’re wondering how to meet the constantly changing needs of your traders as they tighten their belts during the cost-of-living crisis, we’ve included some tips at the end to help you.

1. Continued adoption of APMs

APMs continue to rise in popularity and could very well be the norm for retail brokers in the future. While regional differences remain, globally, consumer payment preferences are shifting away from cards¹ with digital wallets leading this transformation. A clear favorite in the Asia-Pacific market, accounting for almost 70% of online payments in 2021², the use of digital wallets is expected to grow by a further 56% by 2026 around the world³.

Retail consumers have been quick to adopt these payment types and have set high expectations across other industries online. As a result, retail traders continuously expect the same level of convenience, ease and choice in their trading journey. For example, real-time payments are becoming more available worldwide with around 72% of the world’s population projected to have access to instant payments in the near future⁴.

Your opportunity? Keep your traders at the heart of what you do by offering their preferred APMs. We can help you with the right combination of payment options with the potential to increase acceptance rates and drive conversions – all through a single streamlined integration. We have global expertise and local knowledge to help you tailor the customer experience through the right payment products and services.

2. Tightening regulations

Last year did not see any significant regulatory reforms in financial services. However, this may not be the case for 2023, especially in the trading space. Inconsistent passporting requirements across the European Union (EU), for instance, demonstrated a potential gap in how cross-border trading is being monitored, suggesting current rules could be catering to foreign investors. After a review by the European Securities and Markets Authority (ESMA), changes were recommended⁵.

The ESMA review could indicate a trend toward heightened regulation or at least enforcement of existing ones. Under the new guidelines, standardization of reporting under European Market Infrastructure Regulation (EMIR) would be increased and could ultimately contain the related costs for brokers and regulating parties alike⁶. The new standards will take effect in April 2024.

Beginning in October 2024, trading brokers operating from Australia or accepting or targeting Australian retail clients should take care to meet all Australian Securities and Investments Commission (ASIC) requirements. According to a new report, ASIC is much more likely to step in to ensure foreign compliance with Australian law. This could lead to a shift with outside firms partnering with firms who already have Australia Financial Services (AFS) licenses or applying for their own⁷.

Seemingly restrictive to some, stricter and consistently enforced regulations could pave the way to greater trader confidence in 2023.

3. Emerging markets on the rise

With increasing inflationary pressures, ongoing geopolitical conflicts and an already saturated market in the UK and Europe, trading brokers could look to enter emerging markets in Africa, Asia and Latin America⁸.

Not only is Africa home to nearly 1.3 billion people – a population roughly four times that of the US⁹ – the continent is also experiencing rapid digitization and economic growth with the proliferation of mobile phones and more access online¹⁰. One country to watch is Kenya, where the Capital Markets Authority has recently awarded regulatory approval to a local brand¹¹ that can now operate as an online FX broker. Nigeria could have the potential to overtake South Africa as the largest retail trading market in the continent; however, it is currently unregulated, and retail trading could come with unwanted risks¹².

Many Asian markets also have huge potential for growth. For example, the Philippines has one of the fastest growing economies in the region along with a government supportive of foreign investment¹³. Indonesia could be another potentially strong market for traders with its continued growth rebound from the pandemic and steady position in the market despite global economic pressures¹⁴.

Latin American markets have been earmarked as favorable areas for expansion in 2023, too¹⁵. Although the region is likely to continue to experience political instability¹⁶, experts predict that economic uncertainty will not hit as hard as in the US¹⁷.

4. Crypto at a turning point

Recent downturns and higher than usual volatility in the crypto market may be leading trading customers to ask if a recovery could be possible in 2023¹⁸. This could leave brokers at a crossroads where they can choose to commit fully by including crypto in their portfolios, offer it as an APM or way of settlement or abandon the market entirely. Of course, there still may be associated risks; however, accepting and trading digital currencies could mean a point of difference for your company.

Although global adoption of cryptocurrencies has been slow, for example, only 6% of people in the US owned or used them in 2022¹⁹, usage has steadily increased in recent years. With the promise of more regulation of the industry this year²⁰, more traders and brokers alike may see crypto as a valuable asset.

The piloting of central bank digital currencies (CBDCs) and private stablecoins could also open a new avenue for investment. Because CBDCs are linked to government institutions and non-digital currency, they could indicate the possibility of more regular governmental oversight²¹. Last year Worldpay™ became the first global merchant acquirer to offer trading brokers the option to receive settlements in USDC, enabling them to reap the benefits of blockchain and digitalized funds²².

5. From the trader’s point of view

In the face of economic uncertainty and increased inflation, traders are likely to demand more value for their investments. Brokers could navigate this environment by embracing the power of automation and focusing on educating traders on alternative investments and safe-haven assets.

What could this mean for you? Automated algorithms not only have the potential to help maximize trading opportunities and flexibility for your investors but also can provide brokers with the bandwidth to focus on the CX²³. Including algorithmic trading – or algo – in your value proposition could be a way to stand out from the competition in 2023.

Additionally, brokers could expand their portfolios to include alternative investments and safe-haven assets. Although these types of investments have previously been held by more experienced investors, brokers who provide access to all through moderately low-cost exchange-traded funds and mutual funds could help lessen inflation-induced uncertainty for their traders²⁴.

How can Worldpay help?

Retail investors will continuously expect more convenience, ease and choice when trading online. Getting the right combination of preferred payment methods and local expertise could be difficult, but we are here to help.

Our leading acquiring services include local processing and analytics plus a wide range of APMs that can help with optimizing acceptance rates and improving CX. Our dedicated team of experts can provide market-driven insights and invaluable expertise to help your brokerage navigate the ups and downs of the industry – not only this year, but in the years to come.