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Executive Interview – Martin Crawford – Managing Director, Travelex, Australasia & Japan

Executive Interview – Martin Crawford – Managing Director, Travelex, Australasia & Japan

(9 March 2005 – Australia) Travelex began modestly in 1976 when chairman and CEO Lloyd Dorfman opened a currency exchange business in central London. Now almost 30 years later, and following the ₤440 million acquisition of Thomas Cook’s Global & Financial Services business in 2001, Travelex is the largest non bank foreign exchange (FX) business in the world. The company has 6000 workers worldwide, 900 of whom are in this market which covers Australia, New Zealand and Japan. In Australia, Travelex has become the leading Spot FX provider to small and medium sized businesses.

East & Partners senior consultant Paul Bartholomew spoke to Travelex managing director, Australasia & Japan, Martin Crawford, on the eve of the announcement that funds advised by Apax Partners had acquired a majority shareholding in the company and that as part of the deal Travelex would work strategically with Standard Chartered across Asia, Africa and the Middle East.

Crawford joined Travelex as managing director in March 2004 after three years as chief executive officer of MLC Corporate Solutions.

Travelex is performing extremely strongly in Spot FX in our Micro Business and SME Banking reports, both in terms of market share and customer satisfaction. What would you attribute this success to?

Having come from a bank where you’re basically a financial supermarket – I don’t mean that in the sense of being impersonal – but where you’re covering a huge range of product and service, a lot of companies feel they’re not always getting the best service, or the best attention and focus. Travelex, on the other hand, is a monoliner FX player, so that’s all we do, and that allows us to put more resources against clients; it means we have named dealers, we’re not putting people through call centres; and we’re pretty responsive in terms of turnaround times for credit decisions, trading terms, those sorts of things. So if someone wants to deal with us from scratch, they could be transacting with us literally within a few days, which is all the time it takes for us to do our checks. I think you’ll find it takes a bit longer in a bank.

So it’s about responsiveness and service. We’re very customer centric; we spend a lot of time out in the field. We’ve got dealers where our customers are and they’re encouraged to go out and meet them.

Historically, particularly in the SME space, banks have struggled to put the right resources in front of the clients typically because of the way they’re structured. For example you might have a treasury department sitting in the corporate bank, the payments area might be in the business bank, so you get those impediments.

Travelex had a very small commercial payments business when it acquired Thomas Cook in 2000. That was a massive injection of size and scale and capability four years ago but we quickly figured out that the SME segment was an area we could really seek to grow in so a lot of effort, resources, IT development, and those sorts of things have been put into the segment and it’s paying off as you can tell.

So is the Thomas Cook acquisition fairly well bedded down now?

Yes, in terms of the strategy. We’ve done a couple of things recently. In the last year we’ve become very active in Options. We’ve always done Spot and Forward business but we now have quite an active Options book. Clients of all sizes have the need to manage risk and historically Options was the domain of large traders, yet SME clients have the same needs as well, they’ve got forward commitments and risk to manage so we’ve found that having skills in that area and recruiting the right people means we can offer that product extension to those clients.

The other thing we’ve done in the last little while is to upgrade all our trading systems and later this year we’ll be launching an Internet based front end to our dealing systems which will enable clients to transact with us much more efficiently than they have before.

Travelex’s sponsorship of cricket in Australia has obviously raised the company’s profile but there are many thousands of SMEs out there, so how you have gone about marketing to these businesses?

We do a lot of grass roots marketing. Yes, the sponsorship gives us the background but I still have people say to me "Travelex, you’re the guys who sell cricket shirts aren’t you?" So we’ve still got a long way to go to get brand understanding out there. But we do things like attending trade days, agricultural field days, these sorts of things, where the grass roots Australian companies are and we interact with customers. We’ve found that by going along to these events and getting involved our name gets better known. So a lot of clients talk to their networks and counterparts. And we do a number of sponsorships. We’ve just taken up a sponsorship alliance deal with the Australian Wine Export Council, which represents all Australian wineries but obviously we’re targeting the small and medium sized wine companies that have an export need and perhaps not the wherewithal to do it.

So like the banks are increasingly doing, you focus on specific industry segments?

Yes, we go down industry vertical segments. For example, we’re very strong on working on a day to day basis with Universities and what we’ve been doing more recently is helping them manage their inwards payments for foreign students. Australia’s the third biggest education market in the world and there are hundreds of thousands of foreign students here emitting funds from any number of banks and currencies around the world to pay for tuition fees. That’s an administrative nightmare for Universities so we’ve developed a system that would help them recognise and reconcile payments inbound, so through one portal, many payments can be managed through software and clever reconciliation systems. You find niches.

What other industry verticals have you been targeting?

The other one is immigration. We’re finding that a lot of people are coming in from Asia and South Africa, needing to set up bank accounts, bringing monies across, so that’s inbound. Outbound, we’re finding real estate transactions, art, people having to remit funds through eBay, for example, provides a lot of traffic, so we’re finding in that micro payments area that our services are very flexible.

We’re doing well in the SME space but we’re looking to target the mid cap segment, companies turning over A$20 to 100 million. We do have customers bigger than that who are loyal to us. Because of our heritage of being in travel, companies like airlines and tour companies tend to have an affinity with us.

What level of customer retention do you have among SMEs?

Retention’s quite tricky to measure because often with customers this size, it’s quite lumpy, they may not have a need month on month to do payments, so you can have a customer on your books for a couple of years and they might only make a couple of payments. So, have you lost them? No. But are you getting their full share of business? Well, you’d like to think so.

We have retention rates of our core customer base in the mid 90 percent range, 93 to 95, it fluctuates a little bit but we have 5,500 active clients so that’s a lot. Any time you have more than 90 percent of that number hanging on to you, I think that’s pretty good.

As we get up into the larger commercial segments we have to be more aware of who’s competing. We’re very content to be on a panel and that’s how most of this business is done. Even our most loyal customers would be testing us against other suppliers and we don’t mind that at all. So we can very happily coexist with other banks and financial institutions, and keep them honest and chip away.

Are there many boutique FX providers in the market and are they giving you any competition?

If you went to any of the FX trade shows, you’d see a plethora of names, but I think the ones of scale are few and far between. And by scale I don’t mean bragging rights, it means the ability to invest in the systems and back office, and credit systems which you can only do properly if you’ve got substantial size. And the other thing is the counter party network. One of our key differentiators is our accuracy in rates of payments. I’ve worked in banks where you might have 20 or 30 people tracking down misallocation of payments; we have one or two people who do that, so our accuracy rates are at around 98 percent on payments, which is very high. It’s about the right money getting to the right beneficiary on the right day, and therefore you need the network of corresponding banks or counterparties all over the world to do that, and the right systems. It’s very hard to set up from scratch and replicate that at such a scale.

What’s on the agenda for Travelex in the next 12 months?

We’d like to be stronger in the middle corporate segment and we’d like to keep growing our SME segment. Where we have around 12 percent of SMEs according to your surveys, we only have about two percent market share of middle corporates, so we’d love to get up to around 12 percent in that segment too. But the other thing is that most of our business is outbound payments, what we’d like to do is much more inward payments, export business, which means that we’re going to have to offer some sort of trade finance or settlement credit for longer terms than we’re used to doing and that means we might have to align with some other people, or strengthen our balance sheet or whatever. I think the same approach we’ve taken in this segment we can adapt in the middle corporate segment.

We’re also keen to win some outsourcing from some of the banks. A lot of the financial institutions realise that FX is priority number 15 on the list, and so we do a lot of outsourcing with banks, such as Suncorp Metway, Bank of Queensland, Adelaide Bank, most of the credit unions would use Travelex. It’s a niche market that lends itself to that because it’s not threatening to a bank to have us serve their customers because we’re not trying to take their transaction banking away or their core lending and yet it’s a service that we can invest in where they might not be able to.

On the distribution side, we have 180 branches in Australia and NZ which are predominantly servicing the outbound or inbound traveller or tourist. Increasingly, we’re seeing them more as mini hubs for other things we can do, so it could be that a local souvenir shop in Cairns has payments to make or hedging to do and we like to think they could use our expertise in Cairns and not be on the phone down here, so we have to try and offer those people all of our products not just retail, cash over the counter.

You’re also managing director for Japan. What’s the market like there for Travelex?

The market’s very nascent there. Predominantly we’re in the retail space up in Japan. It’s a very small beginning but we do have an ambition to deal in commercial payments because we think there’s a strong demand for an alternative to the banks. The banks are a bit inwardly focused as they’re all trying to buy each other and consolidate and SME businesses there, like here, feel a bit unloved and would like an alternative but we need a banking license and that’s not an easy thing to get.

How often does your chairman Lloyd Dorfman visit the Australian business?

He comes over three or four times a year. Australia in our market punches above its weight for Travelex. We’re nudging 20 percent of group profit which is disproportionately high to what you’d normally see in a UK owned company operating in Australia.

What’s it like working for a company that’s privately owned and therefore not always beholden to shareholders?

It means you can take longer term decisions and not worry so much about quarterly returns, so there are things like IT development you can go hard on. But we run the business as if it’s a PLC to be honest. The reason we’ve been successful is because we’ve had that discipline, so I don’t think we’d change hugely if we changed our status to being a listed company.
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