One of the world’s largest money transfer networks, Western Union, has launched a bank.Stephen Timewell finds out what the move offers the network in the long term.

Since its first money transfer in 1871, Western Union (WU) has been recognised by consumers and businesses alike as a convenient, quick and reliable way to make domestic or international funds transfers and payments. Since then WU, and its Latin subsidiary Orlandi Valuta, have grown to more than 233,000 agent locations in more than 200 countries and territories, making it one of the world’s largest money transfer networks.

Does WU compete against the banks? According to Hikmet Ersek, senior vice-president for Europe, Middle East, Africa and south Asia, banks form an integral part of the service with, for example, eight of the top 10 banks in India acting as agents. Until now, WU has remained focused on its transfer niche and, although it is involved in the payments industry, like the banks, it has remained firmly outside the formal banking sector.

Recently, though, WU officially launched its European bank, Western Union International Bank, and the first branch was opened in Vienna. The bank holds a full financial services licence from the Austrian Financial Markets Authority and plans to offer services in a number of EU countries.

A different focus

Mr Ersek insists that banks and post offices have always been part of Western Union’s business model built on a network of agents. The aim of the new bank, however, is not to compete with traditional retail banks or change WU’s core consumer focus: the immigrant community worldwide, he says. The bank’s focus, he says, will be on developing financial products and services specifically designed for its core niche market, which is largely made up of recent immigrants into the EU. Just as there is growing demand for various card services across Europe, there are also financial services needs, for example, for Albanians working in the UK or loyalty card programmes for Moroccans in Spain, he says.

Western Union has built its business on serving migrant communities around the world and these continue to grow. The 2002 UN International Migration Report estimates the number of people living outside their country of birth at 175 million, and an updated estimate from UN and World Bank demographics specialist Rainer Münz puts the figure at 185 million.

Expansion strategy

Western Union established its Vienna-based bank because certain financial products, such as payment cards and other relatively unsophisticated products, can only be made available through banks. Western Union International Bank plans to pursue an expansion strategy during the next five years and expects to open about 200 branches across Europe as well as offering services in locations operated by WU’s agents and other retailers. These new branches include outlets such as dedicated Nike sportswear shops, which offer the advantage of long opening hours and convenient access.

As part of this strategy, the bank plans to offer simple products, such as pre-paid cards. Customers can load the cards in advance with an amount of money; later, they can pay for goods or services with the card and the amount is debited immediately, enabling consumers to keep track of their finances and to monitor the balance remaining on the card.

To complement the bank’s operations and to move the traditional cash-to-cash money transfer business into the future, the bank will also launch an internet-based money transfer service in several countries across Europe. The service will make it possible to carry out transactions via the internet at any time, using credit or debit cards or, later, Western Union pre-paid cards.

Added capability

A recent Celent report estimates the global remittance market as $159bn and WU as having a 16% market share, giving growing opportunities for what Mr Ersek describes as “the world’s best ethnic marketing company”. The new bank provides added capability for meeting customer needs and providing well-regulated products.

“The founding of the bank is one example of a strategic, long-term addition to our portfolio,” says Mr Ersek. “We know that it takes time to build up a bank. With the Western Union International Bank and its innovative financial products, we will continue to complement our traditional services provided by the Western Union agents. This also offers us the opportunity to strengthen these already existing agent relationships.”

Given that WU expects to expand its number of agents worldwide to 250,000 by year end, this extensive global network – plus new banking facilities – provides formidable competition in its niche migrant market.


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