By Robin Arnfield
An old-line American cash-based money transfer operator is expanding its channel offerings and embracing mobile in a big way. Western Union, the Englewood, Colo.-based company that was founded in 1851, has recently made rapid progress in signing up mobile money service partners around the world and now has 20 mobile money deployments in 18 countries, allowing consumers to send and receive cross-border remittances on cellphones.And the company has several mobile deployments awaiting contract signatures, according to Nick LeCuyer, vice president of strategic planning at Western Union Digital, the firm's digital channels division.
An analyst blog by Zacks Investment Research noted the company's aggressive moves. "Western Union is intent to grow its mobile payment channel of business ... since it foresees tremendous growth in this line of money transfer service," Zacks.com said.
The mobile initiative is part of a multichannel strategy that includes cash-based agent offices and westernunion.com. Recipients have the choice of receiving transfers at an agent office or, where available, via mobile wallets.
To grow its mobile initiative globally, Western Union has focused on working with domestic mobile money service providers that have reached critical mass. "The best way for us to go to market in different countries is to form partnerships with successful local mobile money services," LeCuyer said. "These mobile remittance programs operate in tandem with our agent networks in these countries."
Western Union generally seeks exclusive relationships, though exclusivity is prohibited by regulation in some countries. Arkady Fridman, a senior analyst and consultant with U.S.-based Aite Group, believes the era of remittance firms enjoying exclusive relationships with mobile money service is ending.
"In most countries, there are only one or two mobile wallet providers, and increasingly these companies will have agreements with both Western Union and other remittance providers such as MoneyGram," he said.
Western Union said it takes pains to abide by domestic mobile money and banking regulations in each country where it offers mobile remittances. Many emerging markets lack mobile money legislation, creating a regulatory grey area, and Western Union's policy is to not operate in countries that lack regulations.
"We don't want to get ahead of the regulators, as this will end up hurting our customers," LeCuyer said.
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Among Western Union's most recent partnerships are deals with Nigerian payments processor eTranzact International, U.S. Bank and eSewa, a Nepalese mobile wallet platform with a reported 200,000 users.
This month Minneapolis-based U.S. Bank enabled Western Union transfers from its mobile banking app, and last month, Western Union launched a mobile money transfer service enabling consumers worldwide to send money to eSewa mobile wallets in Nepal. The service was developed as a result of collaboration between Western Union; Nabil Bank, which provides cash-payout agent offices for Western Union in Nepal; and FonePay, which owns eSewa. Also last month, Western Union launched a remittance service for Nigerians with eTranzact mobile wallets.
Western Union has a separate mobile money transfers partnership with the Nigerian mobile telco VTN, one of several telcos the company partners with on mobile money transfers. The list includes Sprint in the U.S.; Millicom, whose subsidiary Tigo has operations in Paraguay, Guatemala, and El Salvador; Globe Telecom and Smart Communications in the Philippines; Vodacom in Tanzania; Afghanistan's Roshan; and Safaricom, operator of Kenya's M-Pesa mobile money service.
Mobile bill pay
Part of Western Union's multichannel strategy in the U.S. is accepting bill payments from about 15,000 U.S. billers, including insurers, credit card issuers and utility companies. Consumers have three ways to use the service. A biller can text the customer, who replies with a text to authorize payment of the bill via bank transfer or card payment. Alternatively, consumers can use Western Union's mobile-optimized bill payment website, or a biller can offer Western Union's Speedpay-branded mobile bill payment apps to customers.
Though not all of the billers support mobile payments, Shapiro said mobile is growing rapidly as a channel.
A transformation in transfer providers
Western Union's closest rival, MoneyGram, also has made a major effort to expand from cash-based money transfers to mobile and online channels.
Currently the company offers mobile money transfer services in Australia, New Zealand, the Philippines, South Africa, Spain and the U.S. In August, it began letting U.S. consumers withdraw funds from their PayPal accounts online or via mobile device, then pick up the money at any U.S. MoneyGram branch.
Fridman said Western Union is the larger entity and seems to lead the market in establishing mobile wallet alliances.
The push by Western Union and MoneyGram into mobile money transfers coincides with the emergence of digital-only remittance companies, such as San Francisco-based Xoom, which only provide online or mobile transactions from the U.S. — although recipients in foreign countries can collect remittances at physical agent locations owned by Xoom partners.
Western Union has been something of mobile money transfer pioneer. In 2007, it teamed up with the GSM Association, a global trade association for GSM mobile operators, to develop a mobile money transfer framework for telcos.
The early partnership with the GSMA and mobile telcos has helped Western Union establish relationships with mobile money services and with launching services, according to Zil Bareisis,a senior analyst at U.S.-based consultancy Celent.
Fridman said Western Union faces pricing pressure from digital-only rivals such as Xoom, but enjoys a significant marketing advantage. "The big problem for digital-only remittance providers is how to raise consumer awareness about their services," he said. "Because they don't have agent networks, they have to spend proportionately a lot more on marketing than Western Union and MoneyGram, both of which own agent networks..
Western Union spent only 3.9 percent of total first quarter revenues on marketing, while Xoom spent 23.4 percent.
Western Union said in an investor presentation that it saw 26 percent year-on-year growth in revenues on its electronic channels in the second quarter of 2013, up from 18 percent year-on-year growth in the first quarter.
Westernunion.com accepts online money transfers in 23 countries, including the U.S., U.K., Australia, France, Germany and Spain. The mobile app is available only in the U.S. and Australia; elsewhere, LeCuyer said, consumers carry out mobile money transfers through Western Union's transactional websites.
Western Union said total consumer-to-consumer transaction volumes on westernunion.com transactional sites increased year-on-year by 68 percent in the second quarter of 2013, while C2C revenues from the sites rose 25 percent year-on-year.
MoneyGram also has seen growth in electronic transactions. Its online money transfer and bill payment transaction volume grew 51 percent and revenue increased 15 percent year-on-year in the second quarter.
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