Why ACI needs Speedpay—and Western Union is better off without it

ACI’s $750 million deal to acquire Western Union’s Speedpay allows Western Union to clear its decks while ACI clears its runway.

ACI gains scale, expanded presence in important bill pay verticals such as higher education and health care, and cash to boost mobile development. For Western Union, divesting Speedpay will allow it to concentrate resources on cross-border money movement and monetize a “non core” asset for its investors.

"[Speedpay] was a standalone business for us. Our focus is in cross-border money movement,” said Mike Salop, senior vice president of investor relations for Western Union. “It had good growth but was not a good fit.”

Western Union’s generations-old business payments transfer model, which includes a heavy emphasis of international remittances, is under pressure from fintechs that are decidedly less than a generation old—using a mix of blockchain and other innovations to execute cross-border payments without having to manage a large brick-and-mortar network.

“Western Union isn’t selling the crown jewels; it’s getting rid of cosmetic jewelry,” said Richard Crone, a payments consultant.

Banks and fintechs are investing in technology such as distributed ledgers and cloud computing to streamline international transfers. PayPal has acquired Xoom to step into Western Union's turf, and Ripple's blockchain has spent years building steam for a system that avoids correspondent banks and other traditional third parties. U.K. fintech TransferWise has also used a "borderless" account to achieve fast growth.

Western Union has responded by continuing to support its 550,000 strong agent network, but also migrating to mobile technology through "staging transactions " on mobile devices to speed processing at brick and mortar centers.

It has also tested blockchain solution with Ripple to add greater speed for cross-border transactions. Western Union also recently made a deal with TerraPay to expand mobile payments.

These initiatives will continue and be helped through the Speedpay sale, Salop said, adding Western Union’s recent collaboration with Amazon is another example of how Western Union is extending its range of services. “We’re looking at digital expansion, particularly in our money management business. We’re leveraging our cross-border platform for new use cases.”

What ACI gets
The ACI/Speedway deal is expected to close by the second quarter 2019. For ACI, the combination will serve more than 4,000 clients in the U.S. with expanded reach in consumer finance, insurance, health care, education, utilities, government and mortgages.

ACI will also be able to scale its On Demand platform business and combine the Speedpay and UP Bill Payment platforms into a single service.

ACI recently upgraded its merchant technology to add more control, flexibility and security, using the cloud to support greater mobile device use. That follows ACI’s acquisition of technology form payment technology companies RevChip and TransSend.

“As the solutions converge for customers across all of these verticals, we can be there,” said Sanjay Gupta, executive vice president of ACI Worldwide. “Consumer finance is a big area that we’ll be able to serve with this combination. Speedpay is also strong in utilities, and beyond that, they have strength in government and higher education payments.”

ACI will also be able to increase research and development investments. Bill pay services are under pressure to accommodate the impact of faster payments and e-commerce on other types of payments, such as utility bills, tuition, mortgages and other recurring obligations.

One of the potential benefits for ACI will be a combination of Speedpay’s scale, technology and industry reach with ACI’s current and future mobile and digital development to centralize user experiences.

“Consumers want to pay with mobile devices, and [recurring] bill pay has been late to the party,” Crone said.

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