One of the most frequently asked question that comes to a forex affiliate’s mind is whether a forex affiliate offer rebates to their traders. In short the answer is no and this article explains why a forex affiliate cannot offer rebates to their forex traders. In order to fully grasp this question, one must know the difference between a forex affiliate and an introducing broker. Also, what are forex rebates and how do they work?
Many a times webmasters sign up to be an affiliate promoting the forex affiliate program. However, over time some forex webmasters do notice that their revenues could be further enhanced by offering forex rebates. This same logic also applies in the case of affiliate commissions. What is better? CPA or revenue share. Read this article that gives out details on the various forex affiliate commission models and elaborates on the pros and cons of choosing between a revenue share or a CPA type of affiliate commission.
What are forex rebates?
Simply put, forex rebates are nothing but cashback deals. From a forex niche point of view, every forex broker charges a certain commission often known as the spread. The concept of offering rebates or cashbacks can be used as an incentive/reason for forex traders to sign up via your account. For more detailed reading, refer to rebates as a forex marketing strategy to understand the concept or rebates in its entirety.
Some forex affiliates might ask, I have a revenue share commission, so why can’t I offer rebates? At the very basic level, forex affiliates will need to have an Introducing broker account in order to offer forex rebates. The reason being that the reporting stucture that is needed is quite different for a forex IB account compared to a forex affiliate account. Reporting plays a crucial role if you wish to offer rebates to your forex traders.
Under a regular forex affiliate account, irrespective of the commission model you are under, the reporting one gets to see is very limited. If you are lucky enough, some forex affiliate programs allows you to see the customer/forex trader’s name, country and amount of deposits made, but nothing beyond that. This limitation of the forex affiliate reporting structure is what makes it difficult for forex affiliates to offer rebates.
Introducing Broker set up
The set up/process to signing up as an introducing broker is also quite different when compared to signing up to be a forex affiliate. Most, if not all forex brokers require additional documentation such as proof of address and so on in order to activate your forex IB account. Operational prcedures aside, in order to be successful in being a forex Introducing broker, there is also a certain amount of responsibility that comes into play. Unlike a forex affiliate who only needs to care about sending traffic, and perhaps a good converting traffic, in the role of an Introducing broker, you are responsible for paying out your traders.
Any mistake such as missing a payment could soon snowball into a major issue and the whole IB concept can actually work against you. Also from a legal point of view, in some countries you might need to even register a company in order to engage in such transactions. A case in point being the Dodd-Frank act that came into play on July 15th. This US legislation requires IB’s to be registered with the governing authority. Although the rules are a bit more relaxed in other countries, due diligence must be applied where applicable.
Getting started as a forex introducing broker also requires a certain level of commitment from a forex affiliate’s perspective. In order to build a really successful forex IB business, other factors such as user experience, communications and so on need to be taken into consideration. The bottomline being that you want to increase the number of forex traders you refer and ensure that the traders who sign up consistently trade.
Introducing broker v/s forex affiliate – Reporting
As mentioned earlier, the reporting structure is what makes all the difference between an introducing broker and a forex affiliate. IB’s can see more critical data such as the trader’s name, email address, deposits made, volume of amounts traded, last trade date, the total commissions earned by the introducing broker and so on. This level of reporting is essential because as an introducing broker, you would want to keep your business transparent in order to build trust with your forex brokers. This could involve sending your traders the weekly trading account activity and so on and not to forget calculating and managing the end of the month payouts.
As obvious, a forex affiliate account will not suffice even if you are on a revenue share model. The forex affiliate reporting will only let you see the total consolidated data as against to the kind of reporting one gets to see under an IB reporting structure.
Introducing broker or forex affiliate – What should I choose?
There is no set rule that determines whether being a forex affiliate or a forex introducing broker is more profitable. Various factors need to be taken into account in order to make the decision. For starters, consider if you have enough knowledge of how the forex/OTC niche works. Without having a full grasp of the subject, it is not advisable to venture into a IB relationship. Being a successful introducing broker also requires more commitment from the IB and can be a bit more tasking unlike being a forex affiliate where things are a bit more lenient.
The ideal scenario for webmasters would be to being their path as a forex affiliate and to focus on developing good relations with the forex broker they promote while learning the intricacies of the business as well. After a considerable period of time, based on how successful you are as a forex affiliate, you can then think about venturing into an Introducing broker model. With the experience gained as a forex affiliate, with the exception of a learning curve that is easy to comprehend, forex affiliates could start further expanding their business as an Introducing broker.
The payouts as an Introducing broker is obviously much higher, further more you get to see and contact the traders that you refer and in marketing terms this can be a goldmine. Introducing broker requires one to be a bit more responsible and committed which also includes having a good business model. Obviously you don’t want to send out mailers to your highest performing traders asking them to switch to another forex broker. Various factors need to be considered that play an important role towards defining the success of your role as an Introducing broker.