Staying in business for 166 years is no small feat on its own — but staying successfully in business with continued growth against increasing competition from FinTech startups is harder still. As of last week’s earnings news, it is clear that Western Union is up for the challenge.
Western Union’s Chief Technology Officer David Thompson told Karen Webster in this week’s Topic TBD discussion that the company is doing what it has always done, since it quite literally enabled faster payments via telegraph lines in 1871.
“We are always moving to where our customers are going,” Thompson said.
But, of course, what customers are doing is an ever-shifting and evolving landscape, which means that Western Union must evolve too. These days, that means embracing digital payments across a host of channels — through online payments, mobile messaging apps and, of course, at thousands of retail locations worldwide.
At the same time, of course, FinTech startups are emerging to compete, creating an environment that Thompson says Western Union finds more engaging than intimidating.
“We have been in the digital payments business for an extremely long time — longer than “digital payments” has been a common part of conversation,” Thompson said. “And we are especially expert in solving that last mile problem for players in financial services. When we move funds, we don’t take cash and mail it to Mexico. We move it securely and we move it electronically and we have been doing that for a very long time.”
Re-contextualizing P2P Payments
There are, Thompson noted, some things that set Western Union apart. Most of its emerging P2P competitors are domestic-only services — and for good reason. Sending money within the United States has fairly low barriers for entry with a straightforward regulatory framework and very simple licensing consideration.
The minute money has to cross an international border, however, the situation becomes different.
“Cross-border payments always involved AML/KYC compliance — and a lot of fraud and risk technology needs [to be] in place … [in order to] do cross-border remittances,” Thompson said. “That is the space where being certain that you avoid funding terrorists, money laundering and human trafficking become a big part of the discussion — and the barriers to entry are (and should be) much higher.”
Since Western Union operates in more than 200 markets, Thompson told Webster that the company is able to “blur the lines” and offer both the domestic or international service without the sender or receiver noticing a massive change in the experience on their end, or an interruption in the flow of funds.
Moreover, he noted, even though they do see a lot of FinTech competitors emerging in the space — and that requires the firm to “keep on their toes” — they do offer a particular feature that is highly important in this business, and they offer it almost uniquely.
“We have cash-out capability that is immediate — and in many of these situations that is an overridingly important concern.”
Most use cases — particularly in Western Union’s classic business line, Thompson told Webster — are support or emergency payments, where immediacy is paramount. Someone is in a strange city with a car repair that needs an immediate answer and some available cash. Or, Thompson noted, remittances sent home to support family members by those working remotely.
The Magic of Messaging Platforms
And then there are those use cases that are part of a bigger conversation about something else — an IOU for dinner, a support payment or an emergency in progress. Western Union’s partnerships with messaging apps such as Facebook Messenger, WeChat and Viper enables the bank to contextualize the very social aspect of P2P payments to billions of customers around the world.
“A remittance is very social, and those conversations are moving to phones and voice and to messaging,” Thompson explained. “Being a part of messaging platforms is about building our tech platform to pick up on contextual conversations so that when a user types, “I will pay you $23,” our system can start preparing that transaction with their preferred payment method and credential to get it sent off.”
And all of that happens, he noted, within the messaging apps — no beaming out to a different app to finish up. The customer, Thompson said, wants the P2P flow to be part of the conversation, and it is Western Union’s interest to give the customer access to the payments flows they want.
This acquisition capability, Thompson said, is enabling new cases and new users. More than 60 percent of those messaging P2P transactions enabled by various tech partnerships are new to Western Union — and they are driving higher transaction volumes. While these “IOU’s” for dinners or splitting the costs of gifts are lower in value than the typical emergency or support payments, there are more of them.
This new acquisition channel, Thompson said, has introduced those new users to Western Union’s other capabilities, bill payment or sending money to other people inside the messaging platform.
Building Bridges with BP
Moving to where the customer is going is more than just “going digital,” Thompson explained. Hence their partnership with BP gas stations in Australia that makes it possible for consumers to essentially use those 24/7/365 gas stations as Western Union agent locations.
The problem, Thompson said, that Western Union needed to solve for was the worker on shift work and the need to send or receive cash when banks and post offices (Western Union’s traditional agent locations) were closed. Online payment channels are 24/7, of course, but if consumers need a cash-in solution, digital channels don’t meet the need.
“If we can go to retail locations where clients are doing another task and combine the two, we are enabling a new way for someone to complete a transaction by doing two things at once. This is what we are hearing from our clients, and it is important to listen to their needs.”
Partnerships, Thompson said, have always been Western Union’s focus and will clearly be a huge part of its future.
A future that Thompson hinted would also include working with smaller banks and credit unions that would like to tuck in cross-border and person-to-person payments services inside their mobile banking app — without having to build it from scratch — and attract new customers with cross-border payments needs.
“Our goal is to move money in minutes around the globe. Tech is at the heart of that,” Thompson emphasized.