In a year that has been marked by mega mergers in the payments space (linking networks, technology and a continuum of products and services), several themes dominate: scale, digital, real-time and cross-border.
Under the terms of the agreement, Western Union will leverage Visa Direct, the card giant’s real-time push payments platform, to offer end users — consumers and businesses — expedited global, push-to-card transfers. The companies said in a release that the pact helps scale real-time, cross-border payments across more than 200 countries and territories, and 130 currencies.
The announcement highlights recent moves by each firm to move more fully onto a global stage, specifically in cross-border payments. As noted in a recent interview with Karen Webster, Western Union CEO Hikmet Ersek said that, in tandem with the money transfer giant’s sale of Speedpay (the bill payments business focused on the U.S.) to ACI Worldwide, Western Union would expand its cross-border platform, with particular focus on global P2P and B2C payments.
Last month, Visa, in evidence of its own cross-border efforts, acquired cross-border payments company Earthport, which works with banks and money transfer service providers, among others, to expedite the global delivery of high-frequency, low-value enterprise B2B payments.
The Visa-Western Union partnership is aimed at cutting the paper chase in the global payments and remittances space. As Visa has spotlighted, $80 trillion is sent across wire transfers or bank accounts globally. The fund flows are hindered — in terms of speed and transparency, where transactions can take days to settle — as a staggering amount are done in cash or physical currency.
In an interview with Karen Webster, Bill Sheley, Visa’s head of global push payments, said Western Union remains the leading industry platform in remittances. (Last year, Western Union completed 800 million transactions for consumers and businesses).
In terms of mechanics, Webster noted, Western Union moves money around the world, and can do any permutation of cash to digital and digital to cash through its cash agent network (and increasingly digital to digital, aided by the implementation of Visa Direct). The added value now — done by the firms as a jointly branded effort, but where white-label efforts may be in the offing — is to deliver those offerings across borders and in real time, which Sheley termed “a key element” of the relationship.
Western Union, he said, has “an amazing network in terms of digital assets, mobile platforms and their cash agent network.” Visa has been building out Visa Direct with a focus on digital reach, he added, along with onboarding, security, settlement and FX conversion services that complement Western Union’s mobile offering.
For Western Union, the pact means it can offer its customers real-time, account-to-account transfers in a much more cost-effective manner. For Visa, benefits accrue as it builds its network, of course, but the partnership also helps issuers and FinTech firms in receiving markets to establish more account holders, particularly in the emerging economies where remittances drive a significant part of a country’s gross domestic product. Remittances done through digital-to-digital means (through prepaid Visa cards or bank accounts), said Sheley, are more efficient and secure than handling cash.
“As we work together, there are going to be inherent friction points [in cross border] that we are going to take out,” Sheley told Webster. “We understand the complexities that are involved, whether you are trying to go from a [brick-and-mortar] to a digital distribution,” or whether firms need help with settlement, acceptance handling or licensing.
The Use Cases And The Roadmap
The use cases are varied, he said, and several, as enabled through Visa Direct, are “embedded in cross-border transactions” of all types, across B2B, P2P or “even me-to-me [transactions].” These are high-volume, low-value transactions that are well-served by Visa Direct rails, offering the use case of an app developer living in one country and paid by a company in another, or a worker in one country who sends money back home on a weekly basis.
While the average remittance is $500, he said Visa Direct has a “sweet spot” that extends all the way up to $100,000. The use cases against that backdrop can span payroll, insurance payouts, pension payouts and bill payments.
The Visa-Western Union collaboration, though cross-border out of the gate, also has the potential to service intracountry transactions. One example: workers living in a city, who send money home to family members located in more rural areas of the same country.
In terms of a roadmap, Sheley said Visa and Western Union intend to “learn by doing. … We’ll get to work straight away.” He added that the initial offering, slated for the end of the year, will come through originating payments out of Europe to a number of different countries across the EU (five to eight of them), Asia-Pacific and Russia.
“When scale-on-scale companies get together,” such as Visa and Western Union, said Sheley, “interesting stuff happens. And that is the case here.”