Money transfer provider OzForex Group Ltd (ASX: OFX) today named its new chief executive as Richard Kimber, who previously held a senior operational role at Australia and New Zealand Banking Group (ASX: ANZ).
The stock gained 2.4% or 6 cents to trade at $2.55 on today's news.
OzForex has been on a steady growth trajectory as it wins business from the high-street banks in executing international money transfers on behalf of retail and business clients. Although recent hiccups include the unexpected departure of current CEO Neil Helm, and the departure of a key business counterparty.
The board probably favoured a new CEO with significant experience at a major Australian bank as OzForex is reliant on banking partners as counterparties in order to process money transfers.
Recently Westpac Banking Corp (ASX: WBC) announced it would no longer act as a counterparty to OzForex, as part of what it said was a "strategic decision" to exit the money service industry in its entirety.
OzForex is unlikely to ever be short of a banking counterparty, but Westpac's decision is indicative of two trends that may prove a negative for OzForex.
The first issue is that the banks now want to protect their own market share in the FX remittance industry. The second and larger issue is the increased regulatory risk around acting as a counterparty to some money services businesses.
Global regulators are toughening up on banks and their counterparty monitoring requirements, with among others, Standard Chartered, ING Bank, JP Morgan Chase, Wachovia Group, Citigroup and HSBC all recently fined huge amounts over money transfer controls and other related regulatory failings.
OzForex has reputedly market-leading compliance standards but the perception that the regulatory environment is going to get tougher for it stands to reason.
Moreover, in my opinion the potential for the Future of Financial Advice Reforms (FOFA) to stop the provision of conflicted remuneration when providing general advice on FX to clients looks a potential issue for money transfer businesses that operate on this business model.
Overall, while OzForex has some attractive aspects to its outlook, it looks an investment for those with a high-risk tolerance as its golden growth days may be gone and it is priced to grow strongly selling for $2.55.
If I had some spare cash and were shopping for a gangbusters growth stock, I'd want one on an attractive valuation, with competitive advantages…
