Given the explosion of contactless payments and the rise of millennials’ favourite money app, Revolut, one could be forgiven for thinking cash is dead. Far from it, says Joe Redmond, managing director of Fexco’s retail foreign exchange division, who notes that “demand from customers is still clearly there”.
“The rumours of the demise of cash are greatly exaggerated; the facts are there is more cash in circulation than ever before, and rising,” Redmond says.
“There is roughly two trillion dollars in circulation, that’s 5pc up on the previous year, and 1.2 trillion of euro in circulation globally and growing, so cash is very much still king.”
The perception that people have moved to a cashless society is not actually the case, judging by the Fexco research, he maintains.
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“It probably won’t surprise you that somebody you might call the ‘silver surfers’ – the retired group [who] will travel two to three times a year – that group certainly … is still very much tied to cash.
“But it is across all demographics. You do see people of 18 or 20 also taking cash, but doing it alongside Revolut.”
He adds: “People still see the value of cash. We have an expression now that we are using in our marketing, ‘play it safe, travel with cash’.
“It kind of sounds counter-intuitive, but the reality is people do see that cash will be universally acceptable, whereas there may be an issue with cards and acceptance with ATM networks.
“This is always in the back of the mind of customers, irrespective of what age.”
The former Bank of Ireland executive is, of course, watching the disrupters in the market and is pragmatic about the future.
“There is a slow migration away from pure cash to more cashless payment alternatives,” Redmond admits.
But Fexco’s retail business will serve around five million people in the UK this year.
And 95pc of the customers it surveys say they will continue to take some element of cash when they are travelling overseas.
About 75pc say they still will in three years’ time, according to Fexco’s research.
“So we don’t see much change. Some people felt credit cards, debit cards, travellers’ cheques were going to replace cash; fintech disrupters were going to displace it, but the demand from customers is still clearly there,” Redmond adds.
He likes Revolut (“I thought it was a great product”) and is watching its development “very closely”.
He says: “The last business we acquired in the City of London has 14-15 branches in the City. Most of its customers are what you would think are early adopters; corporate bankers, lawyers.
“But they will stand outside those branches, maybe for 20 minutes in the middle of summer, queuing to buy their foreign cash.
“What they are saying to us is the same thing customers who have credit and debit cards say: ‘yes, we have this Revolut, but we are still taking an element of cash’.”
What is driving this customer behaviour, Redmond says, is the question of ‘can I be absolutely sure this card is going to work when I get to where I’m going?’.
While Redmond may have a vested interest in the continued use of cash in society, his 27 years with Bank of Ireland, and nine years and counting with Fexco, leave him in a very knowledgeable position.
“On one level, I think the portfolio of Fexco is in as strong a place as it could be,” he says.
“We have these legacy businesses that are still generating revenues and profit for the group, but we are equally mindful about fintech.
“We do see ourselves as a fintech organisation. So I suppose we have a natural hedge in terms of a really good cash cow generating business, but we are developing ourselves.
“The innovation we are doing is very much in the area of payments.”
Last year, Fexco, which employs around 2,500 staff, processed more than 100 million financial transactions and made an overall profit of €17.5m, with 30pc of revenue coming from beyond the European Union.
But the UK, with around 70 million outbound trips every year, and 40 million inbound, is currently one of the main markets for the group.
“Because the UK is outside the eurozone, people have to change money, so it is a very attractive market and, thankfully, it is still a very cash-orientated market,” Redmond says.
The group has expanded there in a couple of ways: acquisition and organic growth.
“We have done eight acquisitions in this business since I have joined. We have about 150 of our own branches in the UK as well,” according to Redmond.
Fexco has just announced a partnership with UK supermarket chain Morrisons, which will see its foreign exchange service available in 100 grocery stores by the end of next year.
It introduced 50 travel money branches into Morrisons stores this year, with a further 50 stores planned next year.
Fexco is also considering a geographical expansion.
The company is looking at increasing its presence in Eastern Europe and Asia.
In the past year, Fexco has looked at acquisition opportunities in Eastern Europe. In the case of Japan and Hong Kong, there have been partnership opportunities with very large national networks.
“Although it is far from certain, we have had a couple of very interesting conversations with very large national networks in Asia,” Redmond says.
“We just have to be very careful that we do something that we can get our arms around from a management perspective, but we do like Asia, and we like eastern Europe.”
The recent protests in Hong Kong are impacting upon tourism in the region, he says.
“We can see that, so hopefully that will pass in time. But we don’t, hopefully, see that as being a long-term issue; it certainly is a short-term one.”
In Eastern Europe, expansion will mainly come through acquisitions.
“We have identified a few [companies] that we have had initial engagements with,” Redmond says.
While the main reason to expand in Asia and Eastern Europe is to grow the business further, the company is also conscious about over-concentration in the UK.
Redmond notes: “We don’t want to be too overly exposed to the UK market so the mandate from the board to me now is, ‘are there other markets where we can establish that are equally attractive to the UK for us to expand in, and potentially use the acquisition strategy as well?’.
“So we are actively looking at that at the moment and Fexco itself is generating revenues in 25 different countries around the world.”
For today though, the talk is about the deal with Morrisons, and the opportunities this will generate for Fexco.
For anyone thinking of buying foreign currency before they go abroad, the first place that comes to mind in making such a purchase is a local bank.
Why then would a person go to a supermarket chain?
“Morrisons is a very trusted brand,” Redmond says.
“We are strategically located at the end of the tills. Ultimately, what drives behaviour in our business, and it’s always been the case, is convenience.
“While price and value is important when people decide where to buy their holiday money, convenience is equally important.”
The banking veteran maintains that the banks have “taken their eye off the ball as far as this service is concerned”.
“They are de-cashing. This has created an opportunity for the supermarkets and indeed the post offices to come in and pick up where banks were no longer really properly serving the needs of customers. Going into a bank branch is not the good service it used to be,” he says.
As part of Fexco’s strategy to take advantage of this opening in the market, the company is currently in talks with the banking sector in Ireland and England.
“Both the Irish and UK banks recognise this is a service they are not performing very well at the moment, and there is now a growing trend towards outsourcing other parts of the banks because their customers are telling them, ‘we want this service and you are not giving it to us’,” Redmond says.
“We are seeing a trend and an appetite on behalf of the banks to say, ‘can we partner with a specialist foreign exchange company like Fexco to enable us to continue to provide this service, even though we are not doing it fully ourselves?'”
Right now, though, the main objective is getting through Brexit.
“If we can find a way through Brexit and everything stabilises there, what we have been investing in, in the UK, will go to another level. Morrisons is a phenomenal opportunity for us,” he says.
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