One of Ireland’s leading fintech entrepreneurs strides across a field at the family farm at Banteer, Co Cork, looking for the cow he bought from Ryanair’s Michael O’Leary. “There she is,” says the tall and lean Frank Murphy, pointing to a handsome red Angus at the bottom of the field.
“She is really docile,” he adds, as if to assuage any fears that even O’Leary’s cows might be manic, unruly.
Invariably, when Murphy is not running Monex Financial Services, a global foreign currency business, he can be found at Glen South, one of the most modern and by his estimation most efficient farms in the country. He has invested €1m in the venture, installing the country’s first feeding robot which operates “24/7/365”, fattening cattle for Larry Goodman’s ABP.
Glen South, which was originally farmed by his late father-in-law, John McSweeney, finishes 1,000 head of cattle a year. The farmyard is immaculately clean. It is also profitable.
“Farming was my first love,” said Murphy, “but I am also an accountant.”
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In farming circles, he is the robot man. In business, Murphy is the father of dynamic currency conversion (DCC), a global system that allows credit card holders to make purchases abroad in their own currency. If you have ever been asked if you want to pay a holiday bill in euros rather than dollars, that is DCC.
Invented here, three of the world leading exponents of DCC, including Monex, are Irish. Monex processed $40bn (€34bn) worth of transactions last year. It earned revenues of €108m in 2016, and profits of €8.5m. Murphy and minority shareholder Michael Crowley shared dividends of €9.3m.
The trade has its detractors who claim that it inflates the cost of using credit cards abroad. BEUC, the Brussels-based EU consumer lobby group, has called for DCC to be banned. One US banking consultant called DCC “a pox on the payments industry”. The European Commission is conducting a review examining “good and bad” practises in the industry, something Murphy welcomes.
“People seem to think this is a new surcharge — it is not,” he says. “If you are using your credit card in Japan, the charge on your card is converted from yen into your domestic currency by Visa or Mastercard , then there is a surcharge levied by your bank who issued the card.”
With DCC, the conversion occurs at the point of sale, and the charge is shared between the merchant, the card issuer and the DCC operator. “We are competing for the same charge,” he said.
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The biggest detractors are the card companies. “You can see what Visa and Mastercard make from foreign exchange, it is enormous” he said.
Farming rather than finance is in Murphy’s blood. He grew up at Dunbrody Park, a 600-acre farm in Co Wexford where his father was estate manager, and attended Good Counsel College in nearby New Ross. Schoolmates included Eamonn and Andrew Boland, whose family owned one of the country’s biggest car dealers. At 16, and with no vacancy on the farm, Murphy was dispatched to University College Cork to do a BComm.
During the summer, he worked for the Bolands’ car hire business at Shannon. Tourists, particularly Americans, when paying with credit cards, always wanted to know how much the rental would cost them in dollars when they got home, said Murphy. It planted the germ of an idea.
After UCC, he joined Cooper Magennis, later to form part of Deloitte. He spent six years with the firm, until, through a partner, he heard of an opening for a financial controller at the Foreign Exchange Company of Ireland in Killorglin, Co Kerry. He met founder Brian McCarthy at Nick’s, a now famous restaurant in the town, and was impressed. Fexco operated a network of bureaux de change, and employed just 14 staff, yet McCarthy brimmed with ambition.
Over the next decade, staff grew to more than 2,000. The company started processing Vat refunds for tourists, and won the contracts to manage prize bonds for the state. It famously took over Western Union’s foreign exchange business in Britain and Ireland for £10 (€11), and later sold it back to the US financial services giant for $159m. It was quite a journey.
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Murphy stayed close to the Bolands — a friendship that included a shared passion for driving rally cars. On a trip to launch a new Nissan Primera model in Italy, Murphy dragged up the old conundrum of his American tourists and their Visa bills. His experience at Fexco armed him with the expertise and contacts to solve the problem. The Bolands, then operating as a Hertz franchise, describe it as Murphy’s “light bulb moment”.
At the time AIB was testing multi-currency software for Gateway 2000, a US company that sold personal computers to consumers over the phone and internet. Murphy reckoned it was a matter of getting that technology into the car hire desk and back office systems of the big car rental companies.
Hertz in Shannon was a natural first DCC customer. “A Fexco employee stood in the Hertz office and witnessed the first 30 transactions,” said Murphy. McCarthy embraced the idea, and with a forex counter in tourist traps across the country, he was well-placed to expand it. Fintrax, based in Mayo, which specialised in Vat refunds, would also offer currency conversion. An industry was born.
“With any failure or success, there is a row,” says Murphy. He clashed with McCarthy over the commercialisation of DCC, and two decades on, the Wexford man is reluctant to “drag it all up again”.
Under an exit settlement, he was prevented from approaching Fexco’s clients for six months. “I was 10 years at Fexco, I had 9½ brilliant years, and six tough months,” he said.
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Monex Financial Services started in the bedroom of his Killarney home in Co Kerry. Once the non-compete lapsed, Hertz joined as a client. Yet breaking Fexco’s and Fintrax’s grip in Ireland would be tough. “I went from being first mover to last mover,” he said. “It’s a very lonely place.”
He realised he would have to look abroad to find customers. The DCC client base is split: card issuers, such as local banks and increasingly specialist companies such as Elavon and First Data, and the merchants, Hertz or a local restaurant. After knocking on a lot of doors, his first overseas client was a Thai bank.
It was not the massive break he envisaged. “Most people travelling to Thailand go all-inclusive, so everything is pre-booked,” he said. Crucially, it provided an introduction to Bank of China. Monex started operating in China in 2003.
Murphy “burnt a passport every two years”, travelling to every market in the world where international travel was growing. Monex positioned itself as the “big ticket, boutique” provider, targeting customers with complex needs and large volumes of transactions.
He carried three passports at any one time, travelled five days a week. “I kissed a lot of frogs,” he said.
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He would find a prince on his own doorstep. The Bolands organised a meeting with Ryanair executives Ray Hernan and Howard Millar in 2000. It was love at first sight. Unlike traditional card booking, DCC offers merchants such as Ryanair a cut of the foreign exchange element of transaction.
The airline is now Monex’s biggest customer and has outsourced much of its treasury services to Monex. It was a massive step up in complexity. “Ryanair operate something like 300 currency pairs, so you are managing sterling and Czech koruna, and euros, and maximising rates across all those 300 currencies,” said Murphy. It also does currency conversions on MyRyanair.
Murphy says markets can “fall like dominos”. For example, it started offering dynamic currency conversion on ATMs for a third party provider at casinos in Las Vegas in 2015. It now manages DCC on 100,000 ATMs across the world.
It took 10 years to add a second airline client. That may reflect a maverick first client, or more likely the historically close relationship between airlines and credit card companies.
At the outset, Fexco went to the European Commission to establish its right to compete. The authorities backed the company, though it stipulated that the cost of dynamic conversion had to be clearly broken down on every receipt. “It meant we were legitimate and regulated across the union,” he said.
Other jurisdictions have been bruising for DCC. Two years ago, the Australian Competition and Consumer Commission fined Visa A$18m (€12m) for anti-competitive practices after it tried to ban DCC for new merchant customer and international credit card transactions at ATMs. Visa argued that DCC added greatly to the cost of using credit cards and hence discouraged use and harmed its business.
“It is a constant battle,” said Murphy. “It is all about competition. No consumer is forced to price a purchase in their home currency. It’s a choice, and competition is about choice. Authorities tend to come down on our side.”
For Monex, the goal is a customer in every country. Monex now has offices in 10 countries. Murphy stopped globetrotting for two years while his wife Teresa, a GP, was treated for cancer. During this time he took over Glen South.
For Murphy, rising competition is a bigger threat than technology. He sees Monex as more fin than tech — “If asked, I say we are in the foreign exchange business” — though it employs more staff in IT than treasury. And despite approaches, he is not selling. “I like the business too much,” he said. Spoken like a true farmer.
The life of Frank Murphy
Vital statistics
Age: 56
Home: Killarney, Co Kerry
Family: Married to Dr Teresa McSweeney; one son and one daughter
Education: UCC, BComm; Institute of Chartered Accountants FCA
Favourite book: Games Without Rules: The Often-Interrupted History of Afghanistan by Tamim Ansary
Favourite film: Rush
Working day
I am an early riser, coming from a farming background. After checking emails and the news, I will cycle or hit the gym for an hour before driving to Monex for 8am. The day is comprised of team or client meetings, conference calls or strategy discussions. I like to take a mid-morning break in one of Killarney’s coffee haunts and catch up on news and emails. I would insist on a daily engagement with each department, no matter how brief, just to “check in” with the team, with the philosophy that engagement is a productive partnership.
Downtime
Family time is important and I have become skilled at achieving a work/life balance. We enjoy time out in west Cork aboard the boat or back at home where I catch up on reading, films, sport, Formula One and cycling the back roads of Kerry. I used to enjoy rallying but I gave it up when I got involved in Teresa’s family farm in 2012.