More and more businesses start to benefit from the large number of traders and investors in the financial markets. Today, new brokerages have the opportunity to specialise their operations and target particular market groups.
For example, new companies can use white label products or act as introduction brokers (WL and IB). These business models help brokers reach tradable assets and prospective clients. To assist you in selecting the ideal model for your company, we will explain the differences between them.
The Overview
A white label brokerage uses ready-made trading systems provided by third-parties with features including market access, payment processing, and a range of financial tools that may be customised to meet their needs. By using pre-made software solutions, FX brokers can enter the market more rapidly under this model than they could if they were to construct these systems internally, which would take time and resources.
It takes a lot of time to hire, train, and install such systems from scratch if you don’t have a competent development team. A reputable white label provider charges prices according to the complexity and degree of customisation of the trading system, and provides it with all the features and specifications that are required.
On the contrary, by easing potential investors’ and users’ registration on the trading platform and turning them into clients, introducing brokers are essential in establishing a connection between brokerage firms and potential investors.
Their duties include marketing and interacting with traders and investors, endorsing the brokerage’s offerings, and inspiring the intended demographic to sign up and transact on the platform. IBs receive commissions in exchange for their efforts in growing the brokerage’s clientele; these commissions might take the form of variable pay based on the trading volumes of their clients or set fees for each new client.
They concentrate on bringing new clients to the firm and keeping an eye on their activities and incentives rather than being involved in the brokerage’s trading decisions, day-to-day operations, or the complicated nature of the currency pairings that are offered.
The Contrast
FX brokerage firms’ market penetration and operational efficiency are greatly increased by introducing brokers and employing white labels. Each uses a different strategy to help brokerages grow their clientele and keep up with technology innovations. The two models differ in the following important ways:
- Business Model
By linking brokerages with institutional investors and traders and receiving a commission for each client they introduce, IBs help their clients diversify their investment portfolios.
White label brokers use trading methods and technology platforms provided by third-party companies that may be customised to meet the unique needs of a brokerage.
- Operating Software and Technology
White label brokers do not need to be skilled in creating and overseeing complex payment systems, trading platforms, and customer support.
Introducing brokers use the technology infrastructure already in place at the brokerage to leverage their networking skills to introduce new clients.
- Flexibility and Scalability
White label providers offer a very flexible and scalable service that can be adjusted to meet the business and service demands of the brokerage.
IBs can only use the products that the brokerage offers; they can grow by expanding their network of referrals.
- Associated Fees
Generally, white label providers have different pricing models for different brokerages and charge upfront costs according to the complexity and customisation of the services rendered.
The commission structure used by introducing brokers is based on the volume of trade or the number of investors they introduce.
Final Thoughts
So, WL or IB? While introducing brokers concentrate on expanding the brokerage’s market reach by putting them in touch with new clients, white labels allow brokerages to swiftly implement advanced trading solutions that fit their needs. The brokerage’s strategic priorities—technological improvement with white labels or market expansion through broker introductions—will determine which option is best.
