The business of financial services adds up for Fexco

Starting out as a one-man foreign exchange service in the 1980s , Brian McCarthy’s business now handles an estimated $5 billion a year

When Brian McCarthy arrived in Killorglin on the second day of Puck Fair in August 1974, it’s likely that no one, including himself, would have predicted that the new assistant manager of the town’s AIB branch was destined to lead a multinational financial services company.

Now, almost 39 years later, the Kerry town is home to the headquarters of Fexco, a foreign exchange and financial transactions processor which handles an estimated $5 billion a year, has 1,700 staff and tentacles that reach to the US on one side of the globe and New Zealand on the other.

McCarthy started this business from scratch in 1981, providing foreign exchange services to tourists and local people who wanted to convert sterling and dollars into Irish punts. Fexco was born out of the opportunity that presented itself when the Republic left sterling and entered the old European Exchange Rate Mechanism, the distant forerunner of monetary union.

The split with the British pound meant that large numbers of tourists and local people would need a convenient means of changing cash, so he left the bank and began offering the service himself. “It had,” he recalls, “to make money straight away.” Otherwise, the former assistant bank manager would have no way of supporting himself or his family.

Fexco made a profit in its first week, and has continued in that vein ever since. The early 1980s may not have looked like the best time to start any business, but for McCarthy and Fexco, it turned out to be opportune. Three years after he established the company, the Government introduced tax-free shopping for tourists from outside the EU, or EC as it was then.

This meant that visitors could reclaim Vat on purchases made in the Republic. McCarthy quickly cottoned on to what was another opportunity, and began offering tourists a Vat reclaim service. Most of the customers were from the US. The company soon discovered that the banks across the pond could not – or would not – convert Irish punt cheques, so the company had to start producing its own dollar cheques.

This opened the door to international expansion. Fexco Tax-Free Shopping was quickly extended to Scotland, where the company thought the idea would work as well as it did at home. From there it grew to cover the rest of the UK and on to Europe.

In 1989, Fexco joined forces with An Post to run the State’s prize bond scheme, which it is still doing to this day. The deal meant that the company had to bring 11 million documents back to Kerry, where the information was inputted into its computer system.

Luckily, Fexco had recently spent Ir£2 million on a new system, which had far more capacity than was needed for its existing operations. In a recent – and rare – speech, McCarthy made light of what would have been a big investment in technology at the time, saying that his business had no real option, as the choices boiled down to something that either had too little capacity or too much.

However, the reality is that Fexco has always made a point of investing heavily in its systems. “It’s the key to all the things that we do here – technology,” McCarthy says.

That key unlocked a series of opportunities. Fexco continued growing through the 1990s, forming alliances with the likes of Western Union and entering both new businesses and territories. It was one of the pioneers of direct currency conversion, the system that allows shops to offer customers the option of paying in more than one currency.

Payment transactions

In 2006, 25 years after McCarthy went out on his own, Fexco Holdings had revenues approaching €200 million and net assets of €100 million. By 2009, when radical revaluations were punching holes in most balance sheets, Fexco’s net assets had almost doubled.