Western Union Makes Digital Push Amid Fierce Competition for Money Transfers (#GotBitcoin?)
The company is looking to expand digital services to 200 countries.
Western Union Co. is aggressively expanding its digital services as the money-transfer giant tries to keep pace with competitors vying for international transfers. Western Union Makes Digital Push Amid Fierce Competition for Money Transfers
At stake in this digital race is a growing share of an industry that each year handles more than half a trillion dollars in remittances, in which money mostly flows from migrant workers to their home countries.
Of the $81.8 billion Western Union consumers transferred in 2017, 91% was sent across international borders. Raj Agrawal, finance chief of the company, estimated that westernunion.com money-transfer revenue—which includes use of the mobile app—last year topped $400 million, or about 11% of consumer revenue.
The digital business has been growing at a roughly 20% annual rate, and this year company executives expect $500 million in digital revenue, he added. “It’s becoming a more meaningful part of our revenue.”
Although the digital business currently makes up a relatively small portion of Western Union’s top line, it represents the company’s strongest growth prospects, analysts said.
“There’s no denying that there’s a transition from a world of cash-centric transfers to one in which digital wallets are becoming much more commonly used,” said Darrin Peller, an analyst for Wolfe Research. “The bottom line is that they have no choice; they must invest in e-commerce.”
Some analysts wonder if Western Union has been slow in making digital a priority and whether it has ceded meaningful ground to aspiring fintech rivals in the race to become the international equivalent of Venmo, the popular mobile money-transfer service owned by PayPal Holdings Inc.
“It would have been nice to have seen [Western Union] do more acquisitions in this space,” Mr. Peller said. “That would have helped accelerate the process earlier. “They are not too late, but they could have done more earlier.”
Western Union’s digital expansion is aimed at grabbing more of the remittance market, which accounted for about $485 billion in international transfers to developing countries, according to the World Bank.
“We are going to be able to address a larger portion of the market,” Mr. Agrawal said.
In the coming weeks, the company plans to launch digital operations in crucial hubs such as Malaysia, Singapore, Mexico and the United Arab Emirates. Last month, the company introduced its mobile app in Mexico, where remittance inflows last year totaled $31 billion.
Western Union’s ultimate goal is to allow customers in 200 countries to be able to send and receive money using whatever methods they choose, whether that means digital services or a walk-up window at a retail location. That would be up from 45 countries where it currently offers that level of service variety.
The company has some advantages that provide a buffer against fintech competition: muscular compliance and regulatory capabilities and a far-reaching physical, retail presence that spans countries where cash is still king, analysts said. Sending a money transfer digitally from one mobile user to another requires that both parties are linked to bank accounts, which is still a barrier for some users.
“Working only in digital, you can only serve those who have a bank account,” said Bob Napoli, an analyst for William Blair. “Everyone is saying cash is going away, but I don’t think that will happen in my lifetime. You still need those payout locations.”
Meanwhile, (Jan 4, 2018)
Western Union Settles New York Money Laundering Probe For $60 Million
Western Union Co (WU.N) will pay $60 million to resolve allegations that it failed for more than a decade to maintain a program to deter and report transactions involving suspected criminal fraud and money laundering, New York’s financial regulator said on Thursday.
The settlement with the New York Department of Financial Services (DFS) follows the money-transfer company’s agreement in January 2017 to pay $586 million to resolve similar claims by the U.S. Department of Justice and the Federal Trade Commission.
DFS alleged that from 2004 to 2012, Western Union failed to implement and maintain an effective anti-money laundering program aimed to deter criminals’ use of its electronic network to facilitate fraud and money laundering.
The regulator said senior Western Union executives and managers also ignored suspicious transactions to Chinese Western Union locations by several high-volume agents, including money transfers linked to human trafficking.
DFS Superintendent Maria Vullo said in a statement Western Union’s executive “put profits ahead of the company’s responsibilities to detect and prevent money laundering and fraud.”
As part of the settlement, Western Union must submit a written plan to DFS aimed at ensuring the adequacy of its anti-money laundering and anti-fraud programs. It must also submit progress reports to DFS.
Western Union said in a statement it had previously set aside $49 million to resolve the investigation.
It also said that it had made substantial improvements aimed at enhancing its compliance programs.
As part of a deferred prosecution agreement with the Justice Department announced in January 2017, Western Union admitted it violated U.S. laws.
The company also agreed in January 2017 to pay $5 million to various state attorneys general to reimburse investigative, enforcement and other costs in connection with related investigations.