Western Union's verdict on bitcoin: There is still no demand
Faced with the question of what is next for digital monetary transferring solutions, Western Union Co.'s answer will not involve bitcoin.
In bitcoin's early days, the cryptocurrency's fans saw Western Union as the biggest target for disruption; one called it the lowest-hanging fruit. Eventually Western Union conceded that blockchain, the underlying distributed ledger technology that powers bitcoin, merited a response. But even today, Western Union is unconvinced that it needs a place in the bitcoin economy.
A business plan for bitcoin with consumer need behind it has yet to be proved, Hikmet Ersek, Western Union's CEO, said in a presentation Wednesday morning.
The reason is simple: People are not using cryptocurrency to go pay their hospital bills. There is no need for innovation because the consumer is not conveying a necessity.
“Nations are built on flags, constitutions, and borders,” Ersek said. “Every nation has a currency.”
Of course, bitcoin is designed to operate without the need for a company like Western Union. Its users can use mobile apps to transfer funds directly without the need for an agent's assistance. But this process has little value if consumers aren't already using bitcoin in their day-to-day lives.
Fiat currency has a lasting presence and with control and national identity at stake, no country will be willing to give up that asset. No national reserve bank wants to give up control of its own currency, Ersek said.
Cryptocurrency is not favorable in Africa-to-Africa transactions, one of Western Union’s largest markets. “A reserve bank in Ghana wants to control their currency and a reserve bank in Senegal wants to control their currency,” Ersek said.
Contrary to its popular perception as an all-cash company, Ersek said Western Union is regularly performing digital transactions. He said it is embedded in its DNA to ask the customer what is next and what they want — and so far, customers are not interested in bitcoin or blockchain transfer options.
Even so, Western Union is keeping its eye on the cryptocurrency ecosystem, and is working on some ideas with cryptocurrency and blockchain for settlement. But these technologies have yet to prove useful, Ersek said.