Western Union taps Visa Direct to boost cross-border transfers

Global money transfer firm Western Union will implement Visa’s real-time push payments platform, Visa Direct, in an effort to speed up and bring transparency to cross-border, cross-currency money transfers, the companies announced today.

Western Union, which completed more than 800 million transactions for consumer and business clients in 2018, said it can offer customers an expedited remittance service onto cards with more transparency, plus an enhanced user experience for both senders and receivers upon implementation. At nearly 170 years old, the company is in the midst of a digitalization and modernization effort to fend off younger players in the space like TransferWise and WorldRemit.

Nearly $80 trillion is sent via a wire transfer or bank account globally each year, according to a 2017 Accenture study. Western Union and Visa claim the process is more complex than it should be due to outdated, multi-step and costly practices, as well as the stubborn prevalence of cash as a preferred payment method.

In the first quarter, Western Union reported money transfer transaction growth of 19% quarter-over-quarter via westernunion.com. This growth was driven by cross-border money transfers, CEO Hikmet Ersek stated on the company’s earnings call in May. He said westernunion.com revenues represented 13% of the company’s consumer-to-consumer segment revenues for the quarter, which represented 79% of the company’s overall revenues.

“With digital, in addition to westernunion.com and mobile geographic expansion, we continue to build our account payout network, including recent collaborations with mobile wallets in emerging markets around the world,” Ersek said. “Although this business is relatively small, it is generating strong growth.”

Also see: Western Union Touts Strong Digital Growth, Amazon Partnership in 3Q Earnings

Bill Sheley, global head of push payments at Visa, said in a statement:

“Together, Visa Direct and Western Union are collaborating with plans to scale real-time, cross-border payments to businesses and consumers in more than 200 countries and territories in more than 130 currencies. This new strategic relationship with Western Union combines the industry-leading capabilities of the world’s largest remittance provider with Visa’s global reach, risk management abilities and operating scale to bring exceptional value propositions and user experiences to senders and receivers around the globe.”

The Visa Direct agreement represents “a key milestone” for Western Union’s account payout network, integrating Visa’s cross-border capabilities to create a more seamless global payments platform, according to Jean Claude Farah, executive vice president at Western Union. “Western Union is looking to expand our cross-border, cross-currency platform with a focus on enabling speed, choice and efficiency for customers and businesses sending money around the globe,” he told Bank Innovation in an email. “This collaboration creates a global payment capability, offering transparency and peace of mind to customers.”

Asked what the big challenges and opportunities are for Western Union in the cross-border, cross-currency payments space, Farah said the company is focused on opening its platform to power services via third-party applications. “Our platform consists of our technology stack, APIs, foreign exchange and settlement engine, compliance infrastructure, retail agent network and digital reach,” he said. “This allows us to leverage our unique ability to connect the digital and physical worlds of money movement and help us unlock new market segments.”

Visa, for its part, has put an emphasis of late on modernizing cross-border payments. CEO Al Kelly said at an event last week that Visa’s recent acquisition of cross-border payments firm Earthport was the most expedient and efficient way to expand the reach and capabilities of Visa Direct, which he said became a much more important growth contributor to the overall business faster than expected.

Kelly noted that 88 of Earthport’s connections into banks in 200 countries provide a direct connection to the local Automated Clearing House (ACH) or Real-time Transport Protocol (RTP) system, which allows Visa to go the last mile to get any bank account in the world. Visa’s top 50 markets are included in those 88 countries, so now we’re not limited,” he added.

Similarly, Judd Holroyde, Head of Global Product Management for Wells Fargo, recently told Bank Innovation that the bank’s rationale for using Ireland-based firm TransferMate for cross-border B2B payments was rooted in the direct access that the fintech had to local clearing systems in non-U.S. markets. “It was attractive to us from a plug-and-play perspective because we’re able to extend that local payment experience for our customers without the traditional mechanism, which would be a customer having to open a local bank account in a foreign market,” he said.

Meanwhile, Visa Direct’s potential in the cross-border space isn’t dependent solely on Western Union’s participation, as Visa also has made deals with MoneyGram, the second-largest money transfer company in the world, and mobile remittance fintech startup Remitly, a big player in South America and Central Europe.

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