“How I went from zero to £358m in six years”

RationalFX founder Rajesh Agrawal has built a multi-million pound forex company but can he beat Western Union?

Rajesh Agrawal, 34, was earning a £65 a month living in India until a job opportunity brought him to London in 2001. Today, he lives in a mansion in Harrow, drives a Mercedes CLS 55 AMG and has earned a place in the Sunday Times Rich List with a £90m fortune.

His company, RationalFX, reported a turnover of £358m last year and expects to increase that to £474m this year. Yet profits at the company haven’t even touched the £1m mark. Why? We grill him for answers…

Q. How did you set up RationalFX?

In 2001, I came to London after being headhunted by a foreign exchange company. As any other guy in his twenties, I was happy working in one of the greatest cities in the world. But at the end of every month when I went to the bank to remit money back home, I felt frustrated parting with a chunk of my salary. So, that’s what got me thinking and I shared the idea with my then colleague Paresh Davdra and we set out to launch RationalFX, a foreign currency exchange business. I own 70% of the business and Paresh owns 30%.

We had no funds whatsoever to get the business going and went knocking on banks’ doors for a loan but came back empty handed each time. Finally, I told the bank that I was interested in a £20,000 car loan and I used that money to get the ball rolling. 

We launched in 2005 from a small one-room office in Brighton, and six months down the line business started picking up and we moved to the City of London.

To date, we’ve transacted £2bn and are growing organically with two offices in London and one in Birmingham and France. We’ve also recently launched Xendpay, an online money transferring service and are very excited about it

Q. What’s your revenue model?

We act like a wholesaler of money. So we exchange a customer’s money in return of a fee. They choose us over the banks because we exchange money at a more competitive rate. We, on the other hand, get a good rate of conversion from the banks because of the sheer volume of the money we exchange. So customers win because they get a good rate for currency exchange and we earn profits in the form of our commission. 

For Xendpay, we charge a commission for sending and receiving money.

How did you scale the business? What stumbling blocks did you  face?

Scaling the business was a Herculean task. In the early days, nine out of 10 people we approached turned us down. But back in 2005-06, we saw a huge spike in people’s interest in buying property overseas and we knew these foreign investors will want to exchange currency. So, we got in touch with estate agents and did a bit of affiliate marketing with them. They would recommend us to the house buyers and in return we paid a small commission to them.

From there, it was word of mouth really that helped snowball the company and bring in customers. Today, we do a mix of marketing activities to spread the word for our business, be it sales representatives calling clients to RationalFX sponsoring the Birmingham City Football Club for 2011-12.

Q. The world is in financial turmoil and the currencies oscillate like a pendulum, how does it affect your business?

It’s a double-edged sword for us really. Before the downturn, a lot of potential clients turned us down because they didn’t want to bother with saving money and carried on using banks for remittances. But after the financial crisis, they started looking to us to save money.

However, the downturn caused a lull in the business all over the world and many existing clients didn’t remit as much money as they did before.

Q. For a business that has transacted over £2bn to date and has a turnover of £358m, isn’t  £162,504 profit pretty low?

I know we haven’t reached the £1m mark yet but, you see, we haven’t had a single penny invested in the business. We get a private equity investor calling up every six to eight weeks. But we ignore them because we want to grow the business organically. 

We’ve spent money we’ve earned to open Xendpay. We’ve invested in building a money transfer app due to launch in the next two months and we’ve sponsored Birmingham City Football Club. Over and above all of this, we’ve stuck to our guns to keep commissions low so that our customers don’t get ripped off.

Q. But how are you any different from any other FX company?

To be honest, forex companies don’t have a USP to compete against each other. I can’t say that our dollars are better than another forex company’s dollars. But why customers come to RationalFX is because we’re a trusted player in the game and we provide a good service and that’s why we have a string of around 20,000 private client and business customers.

For Xendpay, there is no money transfer service that is cheap and convenient like Xendpay.

Q. Really? Not even Western Union/Transfer Wise/PayPal?

I think Xendpay is far more convenient and user-friendly than any existing players. If you use Five-year-old TransferWise becomes London’s latest $1bn tech biz, you have to sign up on the website, create a transaction and then deposit money into a Transfer Wise account to transfer the money.

On the other hand, with Xendpay you have no hassles of depositing money into another account, you just have to use the debit card or credit card to pay the money.

We’re cheaper than Western Union as well. If you transfer £1000 from UK to France right now, Xendpay will charge you £4 and Western Union will charge you £6.90 and PayPal will cost you £11.90.

Q. So will there ever be a day RationalFX beats Western Union Business Solutions, the biggest foreign exchange company in the UK?

They’re really big and we might never be able to turn around profits like Western Union, but I won’t be surprised if I see a day when their profits shrink so drastically that they’d come down to our level.

Western Union Business Solutions is struggling and is pulling a Microsoft – buying online businesses like Yahoo and Skype because you’re failing in the online space.

Western Union bought British-owned Travelex and Canadian payment service Custom House to conquer the online space but it isn’t doing well. Like I said, we’re much cheaper than Western Union in the online space and I’d like to believe that with our vision we’d be profitable in the years to come – unlike them.