The speed at which money transfer payments are evolving from legacy, paper-based systems to digital platforms couldn’t be more stark at Western Union, where Sheri Rhodes has just been named executive vice president and chief technology officer.
The digital revolution has not ignored Western Union. The company recently saw the proportion of its transactions that originate on desktop computers get overtaken by mobile devices, marking a significant turning point for the company, which still operates a global network of walk-in locations.
“It’s challenging and also exciting to be in a position to lead technology at a company that’s evolving so quickly along with the market for money transfers,” said Rhodes, who joined Western Union last May as senior vice president and CTO for digital and payments before being promoted recently to her new role.
Demand for cross-border payments is expanding not just along key migrant corridors, but within global regions, and many new companies and startups are working to capture that growth with mobile-centric solutions that are relatively quick and easy to launch, drawing loads of fresh venture capital.
“We’re every bit as fintech-focused as any of the startups in the remittance space,” said Rhodes, who oversees Western Union’s large—and growing—technology forces.
Western Union’s walk-in centers—encompassing 550,000 agent locations around the world—are still vital for the company’s volume and market share. But even at physical locations, Western Union is using technology to push users to lower-cost and more efficient mobile channels.
In an ongoing initiative, the company is guiding customers to “stage” transactions on mobile devices so they’re queued up and ready for quick processing at the counter, according to Rhodes.
“We’re moving into new markets with mobile and digital at the forefront, and in areas where we already operate we’re bringing a new mobile, digital focus,” she said.
Blockchain and cryptocurrencies are another area of innovation that could cut out redundant steps and some intermediaries for payments flowing across borders, and WU is exploring it, Rhodes said. The company earlier this year began testing Ripple.
“We’re testing blockchain, and so far we see it evolving similarly to how the internet grew up. As standards and protocols come into focus, we’ll use blockchain where it can buy us efficiencies,” she said. “We have an open mind but we’re not getting mired or stuck in any particular blockchain or cryptocurrency."
Early this year Western Union opened a major innovation hub in Pune, India, with a staff of 600 that’s expected to reach 1,000 by the end of this year. The company also operates a big tech center in San Francisco with 400 workers and additional technology operations in Montvale, N.J. and at its headquarters in Englewood, Colo.
“Whether it’s international expansion, improving the retail experience, managing fraud or refining compliance, everything we’re doing with directing talent and leadership is toward digital,” Rhodes said.
Re-engineering legacy processes to a fast-changing digital world is a bit of an art, and as the CTO leading those innovations, Rhodes draws on a wide range of relevant experience.
In a career spanning more than 25 years, Rhodes has held key technology jobs at Visa, Providian (now Washington Mutual), Wells Fargo and consulting firm KPMG. Most recently Rhodes was CIO at digital-imaging firm EFI and prior to that she spent six years at cybersecurity firm Symantec, where she led strategy and execution for software applications and platforms.
At Western Union, Rhodes has been reminded of one of her first jobs, as assistant vice president at Wells Fargo & Co., where she was on the front lines with customers.
“Having experience in dealing directly with bank customers is critical, because developing empathy for users is the overall mindset driving Western Union’s strategy,” Rhodes said.
She also draws on years spent at Providian through 2005, where Rhodes worked on a customized underwriting engine to determine the creditworthiness of consumers with little or no account history. This demographic is similar to that of Western Union’s core customers.
“We did a lot complex modeling—before 'big data' was a common term for it—and technology innovation putting the pieces of the underwriting engine together for this audience,” Rhodes said.
Using technology in new ways to guard against fraud is a top priority. Western Union was burned by fraud a few years ago, leading to $586 million in penalties for internal and external fraud, the largest fine ever levied against a money-services firm by the U.S. Justice Dept. and the Federal Trade Commission.
Rhodes’ team battles fraud by leveraging big data, A.I., machine learning and robotics to study consumer behavior and patterns globally to detect anomalies, she said.
“Recent advances in automated learning make it so we can constantly improve our risk models to make sure our customers are secure and we’re protected, too,” Rhodes said.
Western Union also is testing biometrics to increase security and improve operations efficiency. One approach leverages fingerprints and retinas to enroll customers for the first time, eliminating the need to re-authenticate them on their second visit, she said.
One puzzle that’s yet to be solved is finding the best way to store sensitive customer biometric data. “It’s a work in progress,” Rhodes said.
Competition from traditional rivals like MoneyGram, along with swarms of new players and startups, is intense.
“We have the technological muscle, the name recognition with consumers and the physical presence on the ground, and combined with our evolving digital technology I think we have a better shot at gaining new market share than most startups,” she said.
While Western Union has the technology and physical resources to compete with upstarts, other threats exist.
“In my mind, the question is whether Western Union can convey the ‘cool’ factor that successful remittance startups seem to ooze, along with a superior customer experience,” said Talie Baker, a senior analyst with Aite Group.
Western Union’s cost structure also will pose challenges in the future, Baker predicts.
“Startups have minimal staff and minimal infrastructure to support, so they’re easily able to compete on price. But it takes a lot of capital for startups to be able to take their operations global, and that’s where Western Union dominates along with companies like MoneyGram, Ria or Transfast,” she said.