Climbing The Cross-Border Mountain

While there may be a trillion dollar cross-border commerce opportunity out there ready for the taking, the move to actually tap into the market is not as easy as it looks. Hikmet Ersek, CEO of Western Union, sat down with MPD CEO Karen Webster to discuss how the cross-border market is evolving and how decades of investment in compliance and risk management is a mountain too tall for most others to easily scale.

The cross-border market may in fact be lucrative, but getting there is no easy feat.

The act of moving money from Point A to Point B may seem simple, but Ersek pointed out that when that movement is happening across borders, it can easily take as many as 112 steps.

From having the right licenses in place to dealing with regulation from all sides, and also ensuring transactions are authenticated and secure with anti-money laundering and fraud controls – transferring money globally is hard work that is often underestimated.

Essentially, it costs money to move money.

Many businesses, especially those whose core business isn’t payments, are quickly learning that the journey to cross-border payments is ripe with a unique set of challenges.

But in reality, many of the companies looking to take advantage of the opportunities cross-border can bring just want to enable payments. As Webster noted, it’s unrealistic to expect these businesses to transform into payments players — frankly, it’s just too hard.

Ersek said that as companies begin to realize how many customers they would like to serve around the world and do their homework about how to go about it, they immediately realize the challenges they face if they wanted to build out a set of cross-border payments capabilities.

“The complexity of the business has definitely been our competitive advantage as well as the uniqueness of understanding the business,” Ersek explained. “The investments made over the years in our IT systems, compliance systems and changing our settlement systems have turned out to be the real stability of our business and now a barrier to entry for others.”

Back in November, Western Union announced its partnership with WeChat, Tencent’s popular messaging app, to allow cross-border payments for U.S. users to more than 200 countries and territories through Western Union’s WU Connect service. The technology platform integrates with consumer messaging and social media platforms, like WeChat’s extensive network of users, to facilitate money transfers throughout the world.

Ersek said that Western Union’s service with WeChat, which he described as being like “Venmo for cross-border,” is still in beta testing at this time. The partnership will enable lower-value, ad hoc transactions, which supports use cases for a variety of people that send money at different frequencies.

As Western Union continues its efforts to be seen as more than just a money transfer company, Ersek said it plans to serve other brands like WeChat in order to grow its business in different customer segments.

With more and more businesses making the decision to throw their hats into the global cross-border money movement ring, Ersek expects those companies will look to Western Union as a partner in enabling cross-border payments. “Why would they want to go through the time and the pain in every single country to set up banking licenses, when they can leverage our platform, operations and competency to make cross-border payments happen for them?”

The company now operates in 16,000 corridors. And keeping money moving safely and conveniently has taken a great deal of time and effort over the last 20 years, Ersek explained.

“Most of the money is good money, but one transaction can destroy your reputation,” Ersek pointed out. Which is why the company devotes nearly 25 percent of its 10,000 person workforce to compliance and ensures its systems are constantly upgraded and checked.

Ersek said he is optimistic about the growth Western Union will have in 2016 and expects much of that to come from digital and mobile initiatives as the business continues to move into payments services.

“I feel quite comfortable that we have the right platform for the future,” he stated. “In the past we were seen as just a remittance or money transfer company and that has definitely changed. We are a financial technology company moving value cross-border in seconds.”