Across the world, startups are using digital delivery to challenge companies like Western Union and MoneyGram, a battle that in recent months has become increasingly heated.
In an attempt to beat back its many challengers, Western Union is turning to areas where it sees an advantage, such as the scale of its international network and its relationship with Fiserv, one of the largest technology companies in the banking industry.
Western Union is giving its bank-focused services a tune up, leveraging Fiserv to digitize access to local clearing networks and discounted exchange rates.
"We've historically had a very strong relationship with financial institutions, providing them with services such as foreign exchange and cross-border payments for many years," said Alfred Nader, vice president of corporate strategy and development at Western Union Business Solutions (WUBS), a unit of Western Union. "These Web-enabled services fit in directly with what we're trying to do, which is make it easy for banks anywhere to offer payment processing to their own clients."
The new services include direct credit, which allows financial institutions to leverage WUBS's global clearing network to route electronic payments in more than 130 currencies and more than 70 countries (a larger network is available for traditional transfer methods). WUBS has integrated its network with Fiserv's WireXchange, a Web-delivered service that uses one-time data entry to complete compliance, screening, verification, posting, notification and other steps in wire transfers.
"That's designed to add convenience in using local clearing over other more traditional clearing methods, and in this day and age convenience trumps loyalty," Nader said.
The partnership with Fiserv, which has thousands of clients, opens WUBS' business to a larger range of financial institutions. While the services are being marketed to banks of all sizes, the integration with WireXchange makes the technology available to smaller banks, which enables these banks to compete with larger financial institutions. It also lets WUBS improve its position as a competitive alternative to digital startups.
"There's a cluttered environment for international payment services, so instead of having to go across the street to a multinational bank to pursue cross-border payments, the business can execute everything though a local credit union or mid-sized bank," Nader said.
In the remittance market, that environment includes WorldRemit, an online and mobile-only company that has a large presence in Latin America. Other upstarts include Remitly, ZipZap and Xoom.
"Cross-border remittance is an area of high friction and high delivery cost," said Thad Peterson, a senior analyst at Aite Group. "Western Union has used its brick-and-mortar distribution system to protect its remittance franchise from companies like Xoom, because the receiving side of remittance is completely dependent upon the technical proficiency and interest of the recipient."
A high-tech front end delivery system will fail if the receiver doesn't have a simple way to get the funds into his or her wallet, Peterson said. "Add to the Western Union distribution system the ability to effect direct credit transactions pre-converted into the recipient currency, and you can start to see a lot of the friction coming out of the transaction."