George Deegan: Welcome to the EY CFO Outlook podcast. In this series, we feature some of Ireland's leading CFOs sharing interesting perspectives on a range of topics, from driving growth in their business to leading major finance transformation. I'm George Deegan, a partner and sponsor of EY CFO Agenda programme. In this episode, we welcome Anna Savage of Fexco, Ireland's most successful multinational financial and business solutions provider. With operations in 29 countries, Fexco processes upwards of €34 billion in transactions each year across foreign exchange, treasury and government backed financing sectors. Jonathan, over to you.
Jonathan Healy: Anna Savage, CFO of Fexco. You're very welcome.
Anna Savage: Thank you very much, Jonathan. Lovely to meet you.
Jonathan Healy: Tell us a little bit about what you do first of all.
Anna Savage: Okay. Well, I am the CFO of Fexco Group. Fexco is made up of in and around 14 companies and can be kind of broken down into a foreign exchange and payments business services and a innovation arm where we kind of hold our ventures into new innovative businesses and our partnerships.
Jonathan Healy: Tell me a little bit about what you knew about Fexco in your own career, because it's an unusual company, and we'll get to that. But when did it come onto your radar?
Anna Savage: Well, I started my career in AIB, so I was in AIB for 20 years, and there's actually quite a deep relationship between Fexco and AIB. And so throughout my career I have heard of Fexco and knew bits of what they do. So, firstly they have a foreign exchange store on Westmoreland Street, which I would have done my own cash exchanges through the years. And then AIB Merchant Services, the acquiring arm of AIB, would have had a relationship in dynamic currency conversion with Fexco through the years, and I would have been the business finance business partner for that business over a period of time. And then also the more notable one would be Goodbody. So in 2010/11, AIB sold Goodbody to Fexco and then in 2021 sold it back. And so I would have known of those transactions going on. So I've often heard of Fexco. I suppose, I have learned a lot more about them since I've joined them, but knew touch points about them throughout the years.
Jonathan Healy: What is somewhat unique is the origin story. Fexco started in the early 1980s and it was initially just foreign exchange, wasn't it? It was good old hard cash.
Anna Savage: Absolutely. So where it originated... Brian McCarthy, the founder of Fexco, actually started in AIB itself, and was transferred down to Killorglin and started seeing a trend of a lot of US dollar and sterling deposits coming from merchants in the AIB in Killorglin over the years, and then through a change in regulation in 1981, Brian actually applied to be the first non-bank foreign exchange agent in Ireland and got that licence. And that's where it all started from. So it was literally to try and see that, there was tourists coming in to Ireland from America and England and over out of banking hours, couldn't exchange their currency into pounds.
Jonathan Healy: It's very hard to explain that to young people these days. It's so instant with your phone and with your Revolut or Mastercard or whatever. Back in the day, you used to have to have a thing called cash or worse again, you have a thing called a traveller's cheque that had to be changed into cash. So there was a gap in the market that Brian had spotted.
Anna Savage: There was a gap, and it was a need for both the customer's side - who actually wanted to make transactions but couldn't if they didn't have the right currency - and then there was, the merchants actually felt they were losing out on transactions by not having it. So Brian just saw a gap in the market and went for it. And I suppose that's what Fexco has grown into today. He started the company, the foreign exchange company of Ireland, and that is what Fexco has now grown into.
Jonathan Healy: And of course, it was unique insofar as it was based in Kerry. It spun out of Killorglin.
Anna Savage: Absolutely. And very importantly, it's still there. So our headquarters is still in Killorglin, County Kerry. And something both the family and founders and ourselves are very proud of.
Jonathan Healy: You listed some of the companies that you'd worked with, primarily AIB, before you moved to Fexco. Moving from a big corporate environment to effectively a family run organisation, how much of a jump was that in your own mind?
Anna Savage: To be honest, less of a jump than you think. I suppose, for me, when I first heard of it, I was like, very interesting, big change. But actually I went down and I spoke to a lot of people down there, including Brian McCarthy, the founder, Dennis McCarthy, who was Brian's son, the chairman, and the people, the company. I suppose, being so close to understanding why the company was set up, being able to talk to the founder as to what the origins of the company was gets you way more closer to what the decision making is, making way clearer for me to make decisions on the back of it, when you can actually go to the source of who owns the company and their vision of the company, so that I found that very refreshing.
Jonathan Healy: You talked about the origin of the business being that good old fashioned foreign exchange and changing punts into dollars and back. If it stayed with foreign exchange, it would not be trading right now because that idea has been usurped. So, tell me a little bit about the innovation side of the business that spun it out into 13 other sub businesses.
Anna Savage: Yeah. So I suppose, what I love about Fexco is the word 'innovation' isn't just a word. So I think when you're talking to certain companies, they have innovation kind of as a department in their company, rather than how the whole ethos of the company is run. And I was lucky enough to join Fexco when they were 40 years in existence. So I got a lot to learn, a lot about the history of the kind of celebrations in that 40 year period. And it started in RFX. But to say retail foreign exchange is still a core part of our business. So we do have 60 stores still in the UK, we have stores in Ireland, and we run the FX for a lot of the Credit Unions.
Jonathan Healy: There is still a bricks and mortar element to this?
Anna Savage: Oh, absolutely. There still is a huge amount of cash being used and both in Britain and Ireland for different reasons; going on holidays that you still want a small element, even though the majority of it could be part of a wallet. But no, it still is a big part of our business. But, I suppose, there's been huge innovation within that. So they would have started with retail FX, after that we would have launched into tax free shopping. So, the origins of going for more FX into tax free shopping, there was a change in legislation in the mid 80s as well where foreign customers, before they departed Ireland, could claim back their VAT so Fexco using what we'd learned as part of the foreign exchange market designed the technology in order to allow that legislation be enacted. And where we had terminals sitting in airports and exit points where customers would be able to, before they left Ireland, get their money back.
Jonathan Healy: So they get the cash in their pocket before they leave.
Anna Savage: Exactly. But the first origins of it was through your £2, but they realized through customer research that customers actually didn't want to go back to their home countries with a load of pounds. They actually wanted to convert in their, or get their refund in their own currency. So that is the origins of Fexco; coming up with technology for multi-currency settlement, so that customers could actually go home with the refund in their home currency. And then what spun out of that was our DCC product, which was dynamic currency conversion. So from that continued innovation, they spotted that we actually could use some of that technology, and actually have it at the point of sale where the customers were making the transactions.
Jonathan Healy: Was geography ever an impediment for this? Because obviously, from a tourist perspective, Kerry is where you want to be because you've got an awful lot of tourists on site. But when the business was growing and bringing with it opportunity, did anyone ever go, "you're doing great, lads, but there's not much you can do from Killorglin"?
Anna Savage: So Fexco were always very confident in their technology and their ability. I think when we were going to expand into other areas, we did use partnerships. So that has always been another kind of key element of the success of Fexco is our partnerships. So how we expanded tax free into the UK was through Bank of Scotland. So Bank of Scotland saw what we were doing in Ireland in relation to the technology we had and what we were doing, and helped us to expand in the UK, and introduced us to the likes of Harrods and Selfridges, and we launched tax free in both of those areas and they are still key clients of ours. We've expanded our different product offerings with them.
Jonathan Healy: But normally what has happened when smaller companies come up with innovation like this and they do partnerships, all of a sudden the partners go "actually, we don't need them anymore and we can do this on our own. We can do it just as well." You guys have never suffered from that. Is that because you just keep getting better at it and staying ahead of... you're almost your own competition, if I could put it that way.
Anna Savage: Exactly. But we also value partnerships. We want to work with our partners. We build the relationships. The relationships we have with partners are going for years and years and years. And another example, we expanded our Western Union franchise in the Pacific Islands, and we partnered over there with a company Federal Pacific, which allowed us to learn the local courtesies of the islands, understanding regulations and rules. So where we know we can do it, we know we have the value add capacity to expand. We do use partners to do it to make sure that we're doing it in a proper way.
Jonathan Healy: Everything that you've said so far about the business makes sense. You know, that the natural flow-through you got better with technology. But then there was a management and advisory service thrown in there as well. Now, that is being done by others. So why did Fexco move into that area and what is the USP of that?
Anna Savage: I'll give you a little history on that one. So I talked about Western Union there a minute ago. So, we had the Western Union franchise for Ireland and we expanded it then into the UK. And the UK was a very small, Western Union were finding it difficult to get the footprint into the UK and into Europe. So we bought that from them. And by the end of that relationship we had 12,000 outlets within Europe, between Spain, Nordics, UK. But the back office of that, so the multi-currency settlement, the logistics was all done through a head office in Killorglin, that had about 500, 600 people in the locality employed in it. At that point, Western Union felt we were getting, we were the largest independent franchisor of Western Union at the time outside of the US, so they actually bought it back from us. However, the family and the founders then said we do not want to lose the employment that we have down in Kerry because obviously Western Union are going to bring the back office back over to their own environment, so they used the proceeds of that to start investing in a managed services business. And now we have the guts of 500 people still employed in that managed services area.
Jonathan Healy: What do they do for their customers?
Anna Savage: So we would be the back office to a lot of Irish utility companies. Such as some of the services for Bord Gais, some of the services for Gas Networks Ireland, the SEAI grant administration. So we would talk to about 3 million Irish homes a year. But you don't know you're talking to us because obviously we go through the brand of the customer we're supporting. And in the last few years, we've tried to build up the value chain, and we're doing a little bit more advisory on the advisory side as well now.
Jonathan Healy: A lot of companies would have said "okay, we've sold it back to Western Union. We've made our money. Terribly sorry, guys, but we're shutting down." The McCarthys didn't do that. I mean, it would have been easier to do that, I'm presuming. But they decided, no, we're going to innovate. We're going to go again.
Anna Savage: Exactly. They wanted to innovate. They wanted to kind of create, but they also... what's very important to the family and to Fexco as a company is that we do have local employment and our impact on the community. For example, we set ourselves a target in 2022 to double the value of the company over the course of five years. But we've actually expanded that. We want to actually double the impact and value of the company, and the impact means the impact on the local environment and not just the local communities where we're working in Kerry, but everywhere where we have a touch point. We want to have a community impact value, and also for the staff as well. As Fexco grows, the community needs to grow and also the staff as well.
Jonathan Healy: The premise of the business originally was in an analogue world. It's now a digital world. Is that something that is proving to be a challenge? Because we want to talk about R&D in a minute, but right now, is it problematic that the digital world is almost damaging to the way the business was originally set up?
Anna Savage: Not really. I would say the core values of whether you're working in a digital or analogue world is still the same. We value relationships, we value partnerships, we value curiosity in our staff and all those items have allowed us to grow and adapt and be very successful in and also digital world. I think the core values of the company has stood the test of time and has made us where we are today, rather than being something that wouldn't help us work.
Jonathan Healy: We're going to talk about R&D in a minute. Stay with us.
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Jonathan Healy: One of the biggest challenges out there for every CFO, Anna, is convincing the CEO on the board to invest in R&D. Is that a fight that you have to fight?
Anna Savage: It isn't really, to be honest. Our board and shareholders are significantly behind R&D, and the big example I can give you is the Killarney Road investment or innovation hub that we have just recently built that launched in 2021. It is the home of our Fexco innovation team and IT team, but it's also the home of a public private partnership, called the RDI hub. And that is where we have set up this public private partnership with Munster Technology University and Kerry County Council, and it is currently the home to over 50 start up companies in the region, both international companies that have come to the RDI hub and local companies that have set up there. And what that is, we're trying to create a collaborative space where we're engaging both start ups with ourselves and Fexco, but allowing them to engage with each other as well to build a local ecosystem.
Jonathan Healy: The cynic would say, what are you doing that for? That's not going to make you any money. So what are you doing that for?!
Anna Savage: So a lot of things. Number one, we want the next Fexco to come out of it. As I said the importance to ourselves is that we are creating a local community. So we want another Fexco and we're hoping that it will be spun from the hub. One of the key performance indicators of the hub is that we are creating local employment. So, of the 50 start-up companies, we want some of them to grow and also remain in the locality and be able to grow from there. So that is what is really the essence of it.
Jonathan Healy: The idea of having these new businesses coming up behind you, it is important that they are sustainable and is the plan for them to spin out and go out on their own, or will there always be a Fexco involvement if one does actually make the grade?
Anna Savage: No. So we are independent from them. So they are all individual.
Jonathan Healy: They're their own businesses doing their own thing?
Anna Savage: Absolutely. So in certain cases we will invest in some of them. So they're all looking for seed funding. But we have set up an ecosystem that angel investors in the region will come and invest in it. And in some cases Fexco will invest and in some cases we won't. But they're all individual companies themselves in the hub.
Jonathan Healy: From all of the businesses that you're running. I think you said 14. Each of them has to be sustainable. Each of them has to perform well. How do you manage that? Because, you know, we've had big companies in this studio that, kind of, just did 1 or 2 things. You're trying to do 14 different things. I mean, who is managing that and working out, which one has legs and which one, we may have to have a difficult decision about?
Anna Savage: Yeah. Well, I suppose some of them are kind of, we would call them very mature businesses and have a kind of separate, the way they run. Three of them are regulatory businesses, so are completely run on their own businesses as well. We run a portfolio effect. So not all of our businesses will be successful. It's a portfolio view we take on all our businesses. And what we just need to make sure is that where we are looking at businesses, we call it quickly. So we kind of have this "fail fast, fail cheaply". But we have a regular investment committee that meets every month, and we'll meet more regularly if things need to be discussed more quickly. I actually had a conversation with a CFO, Ruth Fletcher recently. She used to be the CFO of CurrencyFair, and her term, which I loved, was "learn fast, learn cheap" rather than fail fast, fail cheap. Because you'll always learn from the different things you go through. But it's just to make sure that you're keeping an eye on it and not putting more money after more. But of the 14 companies, they're profitable companies. They're all running. But I suppose we're not talking about the ones that haven't because we have cut them as quickly as we could.
Jonathan Healy: One of the things, I'd imagine that's a challenge because of the nature of the world you work in, is cybersecurity. And going back to 1981, there wasn't much of a risk except a fella with a balaclava coming into one of the shops to rob money. Now you're managing a huge amount of data and much of it your own. A lot of it belonging to customers. Is cybersecurity something that causes you anxiety?
Anna Savage: Absolutely! And we kind of take a three-pronged approach to cybersecurity, like it's number one on our risk register. We talk about it on a regular basis, both the exec and our risk committees. We take a three-prong. One is, I suppose, we spend a fair bit of money on the actual infrastructure and making sure we have the proper technology available to us, that will block anyone coming into our infrastructure. We also spend a fair bit of cash in relation to monitoring it. So ensuring that if any activity gets in, we are able to see it. We monitor unusual behaviour and make sure that we know it. But thirdly, and probably the most important that I find is staff awareness. Because you see when these cyber-attacks happen, it's mostly because of a vulnerability on a manual person action. So we do a lot of staff awareness. We do a lot of phishing testing on our staff to make sure that we are fully aware of all the different types of phishing we can get at and that we are fully awake to it.
Jonathan Healy: But, I mean, the reality is that as you're sitting here talking to me right now, somebody somewhere is trying to get into your system, aren't they? You are a valuable target for them, because if they get into you, they might get into somebody else and play on. How do you convince your customers that you're doing everything you can? Because we've seen big companies fail.
Anna Savage: Yeah, absolutely. Look, we do audits every year to make sure that we're keeping up to the standard. As I say, we do have three regulated entities so we do spend the appropriate amount of money and time on training in relation to ensuring that we have the best in class, or as much as we can, hardware and software vulnerabilities stopped before they come at us.
Jonathan Healy: One of the things that is probably going to feature in the cybersecurity conversation, because it's featuring everywhere else, is artificial intelligence. Is that something that worries you because there is a bit of a moral panic around AI right now, or do you see there being an opportunity for businesses such as yours?
Anna Savage: Yeah. So personally, I see it as a huge opportunity. I think this is going to be the next wave of how businesses progress. We've already started in certain aspects using it. Our marketing function has been using it to create different aspects for fair bit of time now. Our software developers are using it. So we're finding that number one, the speed of how it can be done, the quality of what's done, the amount of testing that needs to be done after it is hugely reduced. So the quality of what's coming out. We've also we have a joint venture with the Credit Union. So 16 Credit Unions have joined together to form a company called MetaCU. And we are in a 50/50 joint venture with MetaCU and ourselves. And we have created a quantum AI tool for automated decision lending for the Credit Unions for personal loans which we have deployed.
Jonathan Healy: It doesn't go to a committee anymore. It can be decided by artificial intelligence?
Anna Savage: But through data driven artificial intelligence, okay, so like, the tools that have been built up to create an automated decision.
Jonathan Healy: So quite literally, computers says no!
Anna Savage: Yeah, yeah. But now if it says no it goes "deferred".
Jonathan Healy: Absolutely, someone else can make a decision. But the whole point of AI from what you're saying is the correct application of it, which is it speeds processes up. And frees up people. The other side of it is you might need fewer people to make decisions in relation to that. I mean, you've gone from a business that was purely customer facing to one now that, a lot of it is happening behind a screen and doesn't need human interaction, so is it going to become more of a challenge for the company going forward to keep the staff numbers where they are if technology can do a lot of their work for them?
Anna Savage: So the way we are seeing it at the moment is that it's actually just creating different jobs. So like, for example, in our managed services we now have produced a, we're calling it the Fexco Smart Assist. All companies want to use AI, but some of them are confused as to what they should be doing with it. So, what we are doing is we're providing a service and a product through our managed services area to help some of our current customers in relation to focusing on use cases but putting a bit of structure around it. So looking at a data source and saying use the AI tool only on this data source, putting a governance around it and helping them structure it and actually getting the benefit from it. So at the moment, it's creating roles for us in relation to how we are supporting our customers in using the AI.
Jonathan Healy: So in other words, this is probably the next natural progression for your business.
Anna Savage: Absolutely. Yes.
Jonathan Healy: You've worked as a CFO a lot, in other roles as well and now the CFO of Fexco. What has it taught you about resilience, because when you're in this role, you're going to get knocks, things are going to go wrong. What have you learned?
Anna Savage: So, prepare as much as you can. I would not underestimate the level of what you need to prepare for. And then if something happens that you have not prepared for, you use your intuition and believe in yourself and everything you've done in relation to preparing for it gets you there. We actually had a talk with Dr Karen Weekes who was the first woman to solo across the Atlantic Ocean unsupported. And she was talking about her preparation, and she was saying, like, you can't prepare for a storm in the middle of the Atlantic. But what she did for that is she actually went into a gym, put the soundings of a storm around her, put the visuals of a storm around her, and therefore she did as much as she could to prepare for that. But of course, it wasn't in there when it did happen in the Atlantic, but she was able to pull on everything she could have. She wasn't worried about the noise or the visuals. She could focus on the things that she needed to focus on in this new environment. I think that was a really, like, what she was doing obviously was very different, but...
Jonathan Healy: I'm trying to work out what you do is open a very bad Excel sheet...
Anna Savage: Exactly.
Jonathan Healy: And see what your mood is after!
Anna Savage: Yeah. Prepare for what you kind of imagine yourself. And therefore when crisis happens, you're able to pull on all that and then use the new information you get to get to the best outcome.
Jonathan Healy: You're clearly passionate about this business. Otherwise you wouldn't have joined it, says you, and you wouldn't still be there. But like everybody, you have to realize that passion may at some point come to an end. It may not. You may stay there for the rest of your career, but how will you know if it's time to move on?
Anna Savage: I think I'll know when I lose the passion. And I honestly do, like I suppose at the moment, I'm enjoying every challenge that comes at me in Fexco. As I said there's 14 companies. There's always something new doing. I'm also loving the outdoor life in Kerry. So since I've joined the company, I've done the Ring of Kerry twice. Cycle..
Jonathan Healy: That's not compulsory! You did that through choice!
Anna Savage: But it was kind of to prove my point down there, that I could do it. I suppose there's a lot that I'm enjoying about working for Fexco, both on the work life balance, but the challenge I'm getting. And if that ever dies down, I think for both me and the company would want me to move on. Bur for now, that's certainly not what I see in the near future.
Jonathan Healy: It's a very creative space, by the sound of it, and you have people who are coming up behind you. What do you want your legacy to be? If and when the time comes to move on? I mean, what do you want to say Anna Savage did with this wonderful family firm that was founded in the 1980s?
Anna Savage: Well, I hope that I was able to make value added decisions for the company, but yet kept the ethos and the values that they see strong in place. Like when you talk to people that work for Fexco for a long time and even new, they love the fact that we are family values, wellness is a huge, important part of it. We want this company to be kind of continue in growth in value. And I hope at the end of it that we will have achieved that, but kept what is true to this firm alive as well.
Jonathan Healy: We always finish with a rapid fire round. Steel yourself for this. Apple or Android?
Anna Savage: Oh, Apple.
Jonathan Healy: Books or e-reader.
Anna Savage: Ooh, books really, because when you're on holidays or you're relaxing.
Jonathan Healy: This is a very important one for you. Cash or contactless?
Anna Savage: Ah, Jonathan! That's like taking two of my babies and asking me to choose. I can't do it. They both have their place in the world.
Jonathan Healy: Okay, you're pleading the fifth on that one. Soccer or rugby?
Anna Savage: Soccer, if I had to but can I pick GAA?
Jonathan Healy: That's fine. We should include that. What's the best advice you'd give to your 16 year-old self?
Anna Savage: Back yourself. Like really when you're going out there, no matter what experience you have, you have learnings. Just trust yourself and maybe take a bit more risk.
Jonathan Healy: If you weren't a CFO, what do you think you'd be doing?
Anna Savage: Oh, I'd say still knocking on doors trying to be a CFO. I love data decision making, I love logic, I love, I enjoy what I do.
Jonathan Healy: You wouldn't want to be an inter-county footballer or...
Anna Savage: I don't think so. I like enjoying it, and watching it, and participating in celebrations. Plying it I don't know!
Jonathan Healy: CFO for life therefore! Anna Savage from Fexco, thank you so much for joining us.
Anna Savage: Thank you, Jonathan.
Jonathan Healy: And that's it for this episode of the CFO podcast from EY. We'll talk to you on the next one.
