Tourism group Tourvest has acquired the SA assets of Travelex for an undisclosed sum, creating the biggest independent foreign exchange (forex) business in SA.
With Tourvest’s 500,000 forex transactions a year and Travelex’s 360,000, the deal is going to increase the company’s share of the travel-related forex market in SA to more than 20% when credit card purchases are excluded. The acquisition will increase Tourvest’s forex branches to 87.
Competition Commission approval for the acquisition was received earlier this year. Tourvest has been seeking an international partner as its franchise agreement with American Express is coming to an end in June.
American Express is exiting the forex market globally and in SA following a decision to focus on its core payment business. Under the deal, all American Express forex branches will be rebranded as Travelex from June. American Express will continue its credit card venture with Nedbank in SA.
Tourvest Financial Services CEO Andrew McDonic said: “It was important for us to get a globally recognisable foreign exchange brand to attract inbound tourists who may not be familiar with our brand. They know Travelex because it is the biggest travel-related foreign exchange company in the world.”
Travelex has more than 1,200 forex branches in 27 countries.
Tourvest acquired the travel and forex divisions of American Express from Nedbank in 1999 and concluded a franchise agreement that expires in 2019.
SA’s travel-related forex market is estimated at R25bn a year, excluding credit card spend. Of this, R21bn is related to SA residents travelling abroad, while R4bn is for transactions for inbound tourists.
Credit and multicurrency prepaid cards are becoming a significant part of travellers’ currency, but McDonic thinks demand for foreign notes will remain high for some time, especially among local travellers visiting other African countries.
“I was surprised that 70% of travel money is still cash. But it’s not difficult to understand why. The credit card process can be complicated. People want to know exactly how much they will be charg when they make purchases abroad,” said McDonic.
Apart from the competition posed by credit cards and banks, local forex bureaus have had to deal with the volatile rand, which decreases the demand for forex services because more people chose to travel locally. The rand was one of the worst-performing emerging-market currencies in 2018.
“It does dampen the demand for leisure travel but on the corporate side, demand is not really affected much. On the flip side, a weaker rand boosts inbound tourists where our margins are higher,” said McDonic.
Tourvest is hoping to play a bigger role in the money transfer market. Travelex provides money transfer services, while Tourvest is a sales agent of Western Union.