THE announcement this week that it will provide foreign exchange services to key branches of Co op Travelcare, the fifth largest British travel agency, is the latest departure for Fexco, the Killorglin based foreign exchange to data processing group.

The group's other activities include a VAT refund service for tourists, the Western Union money transfer franchise for "Ireland and Britain, management of the Prize Bond scheme and, more recently, stockbroking.

Diverse though it may seem, the various businesses all have a common thread, according to Brian McCarthy, the 52 year old former AIB banker who set the company up in 1981.

"Generally we focus on money transfer in one way or another," explains Mr McCarthy. "We design systems and implement them".

Money transfer is seen as the preserve of the large banks which control the clearing network. But small companies such as Fexco can carve out niches for themselves by responding, quickly to market needs Mr McCarthy says.

He argues that large financial institutions are not able to make quick decisions because of their hierarchical management structures. They are also hampered by high cost bases which make small scale operations less profitable.

It was the failure of AIB to act quickly on his ideas that caused Mr McCarthy to quit the bank and go it alone. As assistant manager of the bank's Killorglin branch, Mr McCarthy suggested it would be a good idea to offer a bureau de change facility that operated outside the hours then worked by the members of the Irish Bank Officials Association. The idea fell on deaf ears in the bank centre.

In 1981, Mr McCathy remortgaged his house and opened a bureau de change in Killorglin and another in Glenbeigh. A bureau in Killarney was added shortly afterwards. The company now has over 400 outlets in Ireland and 600 in Britain.

The new company realised early on that it would have to employ technology if it was to keep down its costs. A computer centre was established in Killorglin which remains the hub of the group's business.

Fexco's orientation towards technology allowed it to enter what has become its second most important area of business, organising VAT refunds for tourists. In 1984, the VAT laws were changed to allow retailers to make VAT refunds to tourists.

However, the system quickly ran into logistical problems with the onus being put on the tourist to claim back the VAT. The practice of making the refunds in Irish pounds was also unpopular.

Fexco set up a centralised system which reclaimed VAT on the tourists behalf and payment was made in the currency of their choice. The operation was expanded to Britain in partnership with the Bank of Scotland and then into France in partnership with Banque de Riveud in Paris.

By teaming up with established local financial institutions, Fexco was afforded introductions to the major retailers such as the House of Fraser chain in Britain. Fexco subsequently bought out its partners and now feels its has sufficient stature to obtain its own introductions, according to Mr McCarthy.

Over the last six years, the company has added several other strings to its bow. In 1989 it won the tender, along with An Post, to administer the revamped Prize Bond scheme. In 1990, it obtained the Western Union money transfer franchise for Ireland and Britain.

Both Prize Bonds and the Western Union system have a solid future despite the advent of the National Lottery and more sophisticated saving products and money transfer systems, Mr McCarthy says.

Prize Bond's have a secure future as a Government backed saving scheme, he says. There are also opportunities to become involved in the administration of similar schemes in Asia, he believes.

Western Union has over 18,000 agents in 120 countries linked to a central computer system. It allows money lodged with one agent to be withdrawn by a named party from another agent. The system is popular in Britain especially among people wishing to transfer money to the Caribbean and Eastern Europe.

Around 70 per cent of Fexco's business is still accounted for by the core foreign exchange operation. However, Mr Carthy is reluctant to give any figures for the company's financial performance. Turnover figures are not very meaningful in the context of a foreign exchange operation and profit figures are kept confidential for commercial reasons, he says.

Industry estimates put Fexco's share of the Irish foreign exchange market at between 2 and 3 per cent. This would equate to a turnover in the region of under £300 million. The very competitive basis of the market would imply that it operates on a margin of less than half of 1 per cent. This would in turn suggest profits of under £1 million from the Irish foreign exchange business. The group's foreign exchange turnover in Britain is slightly larger but would not necessarily be any more profitable, industry sources believe.

The only comment Mr McCarthy will make on profits is that they are nearly all reinvested in the company. Fexco develops much of its own software. It has 20 information technology staff, out of totals staff of 400, and spends around, £1 million a year in this area, according to Mr McCarthy.

The inevitability of a single, European currency has made diversification a way from foreign exchange business a priority for the company. Data, processing is the area in which Mr McCarthy sees the best potential for growth. Fexco has recently moved from a mainframe to a unix based system. "It cost us a fortune," is Mr McCarthy's only comment on the size of the investment.

The company's high technology, low cost base, strategy will create opportunities for it to provide data processing service to financial institutions, he believes.

The decision to move into stockbroking is an example of how Fexco believes its focus on technology will allow it to compete in traditional markets. The stock market is one of the last financial institutions to fully embrace new technology, according to Mr Brian Murphy, an executive director of the company.

However, the full implementation of technology in broking is inevitable and by establishing a presence as a discount broker now, Fexco hopes to be in a position to carve out a niche for itself in the years to come.

Mr McCarthy leaves much of the day to day running of the group to management. But the well worn phrase "hands on" is used by Mr Murphy to describe Mr McCarthy's approach. As the 51 per cent shareholder, it is not surprising that he should want to remain directly involved. The remaining 49 per cent of the company is held by the 11 other directors, of which all but two are members of senior management.

Mr McCarthy and Fexco's avoidance of publicity extends to the constitution of the ultimate parent company, Fexco Group, as an unlimited company. As a result there is no statutory requirement to file accounts.

The main reason for the secrecy is to keep the competition in the dark as much as possible, according to Mr Murphy. Secondly the company believes it is necessary to promote the Fexco brand. Most of its customers are once off and most are more interested in either service or price.