Western Union brands like Orlandi Valuta, Vigo & Pago Facil compete in the electronic fund transfer industry, one of world trade's most lucrative niche markets.

Some 200 million workers live outside their home countries to earn higher wages, part of which is sent to sustain their families back home. Mexico followed by the Philippines and India are the top nations for receiving money transfers.

According to Aite Group, foreign labourers will transfer about US$289 billion to their homelands in 2007. Robust demand for international money transfer services is expected to grow steadily for another 40 years.

The Western Union Company

Processing over one million transactions daily, Western Union is a giant in global money transfers. Generating almost US$5 billion in revenues for 2007, the company transfers cash in 120 currencies.

The company’s businesses are organized into two major segments:

• Consumer-to-consumer money transfer services (84% of 2006 revenues) enable people to send money around the world in minutes
• Consumer-to-business payment services (14%) allow mostly U.S. customers to make one-time or recurring payments to utilities, financial service providers, governmental agencies and other billing organizations.

Remaining revenues come mostly from branded money orders and prepaid card services in the U.S. and Canada.

How Western Union Makes Its Money

Transaction fees account for some 82% of revenues. These charges depend on the transaction’s amount, and the locations to and from which funds are to be transferred. For example, Western Union’s transfer fee for sending 42,396 pesos (about CDN$999) from Canada to Mexico is CDN$50. Sending 37,352 rupees (also about CDN$999) from Canada to India€ costs CDN$72.

In addition, Western Union generates about 15% of its revenues by currency exchange trading. The company pockets the difference between exchange rates set for wire transfer senders and what Western Union pays for the currency. Commissions make up the remaining 3% of revenues.

How Consumers Buy Western Union Services

Over 90% of Western Union consumer-to-consumer transactions are traditional cash money transfers. Customers visit one of the company’s 312,000 walk-in agent locations found in over 200 countries and territories.

The company offers two other ways to send money around the globe:

• Website westernunion.com serves a growing cohort of consumers in America, Austria, Australia, Canada, France, Germany, Ireland, Netherlands, New Zealand, Norway and the United Kingdom.
• Consumers can also send funds by telephone by calling a toll-free number.

Global Competition for Money Transfers

Western Union faces tough competition from financial institutions of all sizes, but in particular from big bank rivals like Bank of America, Citigroup and Wells Fargo. The company also competes with many global and regional money transfer providers, informal networks and alternative channels. These include mail or commercial courier services, online money transfer services and automated teller machines.

Western Union’s formidable size, extensive global network reach, strong brand names and loyal customer base are compelling business advantages that make Western Union the world’s choice money transfer company. For many migrant workers, Western Union still represents the easiest, fastest and most reliable way to send money to their homelands.

Western Union also has a long list of world-class clients. A few examples include postal services in Australia, China, India, France, Pakistan and Russia, as well as the State Bank of India and 7-Eleven stores.

Strong International Focus

International operations continue to drive Western Union’s revenues.

In 2006, Western Union garned 10% of its total consumer-to-consumer transaction revenues from Mexico (up 3% from 2004). Transactions between and within U.S. and Canada accounted for 16% (down 5% from 2004). International revenues from close to 200 other countries represent 74% of total Western Union revenues (up 2% from 2004).

With 80% of Western Union agent locations outside America, company management have targeted China, India, Philippines and the Middle East as geographies with the strongest potential for revenue growth.

Sources for this Article

This article presents independent insights from data including the 2006 annual report presented on westernunion.com.