Western Union vs. Fintech: How WU is Adapting

Adapting to a Digital Future: Western Union's Transformation

The adage suggests that established entities struggle to embrace change, yet Western Union is actively challenging this notion.

For almost 150 years, Western Union has been a key player in the cross-border payments industry. Currently, the company serves approximately 150 million customers globally, encompassing both those sending and receiving funds.

Facing Competition and Embracing Digital Innovation

In recent years, numerous fintech companies – including Wise, Remitly, and WorldRemit – have emerged as competitors to Western Union. However, the established payments leader is responding with substantial investment in its digital capabilities, aiming to excel in the areas where these fintechs thrive.

The COVID-19 pandemic significantly accelerated the shift towards digital solutions across various sectors, and money transfer was no exception. Western Union experienced a positive impact in 2020, with its overall digital money transfer revenues – encompassing WU.com and its digital partnership initiatives – increasing by 38% to surpass $850 million, compared to over $600 million in 2019.

WU.com itself witnessed a nearly 30% rise in annual active customers, reaching 8.6 million.

Projected Growth and Market Position

The company anticipates that its digital money transfer revenues will exceed $1 billion in 2021, following a 45% growth in the first quarter, reaching a new high of $242 million.

Western Union currently asserts its position as the largest cross-border, digital, peer-to-peer payments network, based on scale, revenue, and channel reach.

This focus on enhancing digital operations began a decade ago, with the company expanding its digital send capabilities and bank account, wallet, and card payout options to a wider range of countries. This expansion, coupled with the pandemic’s influence, has reshaped Western Union’s overall business profile over the past 15 months.

Shifting Revenue Streams

In 2020, digital channels accounted for 29% of transactions and 20% of revenue within the company’s consumer-to-consumer (C2C) business, a notable increase from 16% and 14% respectively in 2019.

Western Union has also opened its platform to third-party financial institutions, positioning itself as a facilitator for end-to-end payments processing.

Insights from Shelly Swanback, President of Product and Platform

TechCrunch interviewed Shelly Swanback, Western Union’s president of product and platform, to discuss the company’s digital strategy and future plans beyond payments, which include banking products.

This interview has been edited for clarity and conciseness.

Adapting to the Pandemic

TC: How did the COVID-19 pandemic affect your business, and what adjustments did you make?

Swanback: As the pandemic unfolded, our initial focus was on supporting customers who might be unable to access retail locations due to lockdowns.

We realized the importance of “everyday innovation” – that innovation isn’t always about cutting-edge technology, but rather improving existing products and services.

For instance, we implemented home delivery of cash in certain regions, navigating complex regulatory and security requirements. We quickly established cash delivery services in Sri Lanka, Nepal, Jordan, and other countries.

We also explored offering video-assisted digital money transfers to assist those less familiar with technology. While customer demand for this service wasn’t as high as anticipated, the technology developed for it – specifically, the ability for customers to upload documents electronically – is now being utilized in other areas.

Leveraging Physical Presence for Digital Growth

TC: Western Union emphasizes that its extensive physical presence supports the growth of its digital operations and expansion into new services. Could you elaborate?

Swanback: The success of our digital business is exciting, and we aim to continue that momentum. However, our strong physical foundation allows us to build more meaningful, account-based relationships with customers and offer services beyond money transfer.

We benefit from a globally recognized and trusted brand, and customers have expressed their willingness to trust us with additional services. We are developing an ecosystem or marketplace tailored to the 270 million migrants worldwide, connecting them with family, friends, and merchants offering culturally relevant goods and services.

We plan to launch a market test in Europe later this fall, offering bank accounts, debit cards, and multicurrency accounts integrated with our money transfer services.

Strategic Partnerships

TC: What is the significance of recent partnerships with Google Pay and others?

Swanback: We aim to provide our cross-border capabilities through co-branding or white-labeling, reaching customers who prefer to interact directly with their banks. For example, Google Pay users can now initiate cross-border transfers within the app.

This dual approach – building direct customer relationships and offering our platform to others – is a key part of our technology modernization. This modernization allows us to expand into various segments, including consumer-to-business, business-to-consumer, and business-to-business.

Technology Modernization

TC: Can you provide more details about the “modernization” process?

Swanback: Like many financial institutions, we are migrating to the cloud. We are well underway in moving applications to the AWS Cloud Platform.

Over the past 12 to 18 months, we’ve migrated a significant portion of our customer agent transactions to Snowflake. We’ve consolidated 33 data warehouses, resulting in 20 petabytes of data in the cloud. This data foundation is enabling us to modernize our applications and leverage artificial intelligence and machine learning.

We are applying AI and machine learning in customer-facing processes, such as a telephone money transfer product powered by a virtual assistant, which delivers an exceptional customer experience.