EDGING AHEAD

As Vice President of Product, leading innovation and development at Western Union Business Solutions, Scott Johnson drove the launch of WU Edge, a trading platform that’s offering global opportunities to thousands of small businesses

With more than 550,000 agent locations across the globe, Western Union’s distinctive black and yellow logo has inspired huge brand recognition and loyalty over the years.

Be it at a kiosk in rural Africa or a corner shop in London’s urban jungle, it’s universally recognised as the portal that enables migrant families separated by economic need, as well as small businesses that are often excluded from mainstream financial services, to survive.

In 2018, it moved an astonishing $300billion around the world and handled more than 800 million transactions in individual remittances and commercial transfers – much of it paid and collected in cash.

But the arrival of new, entirely digital money transfer agents is forcing a change in its business model; and open banking and application programming interface (API) technology is giving it the freedom to achieve it.

Scott Johnson leads product innovation and development at Western Union Business Solutions as vice president of product. He sees open banking as a ‘massive opportunity’ to transform the way Western Union, and indeed the world distributes its money. By creating aggregated services across multiple providers, he says, established financial services such as WU will benefit – and, ultimately, so will customers.

“Whether it’s through APIs or embedded solutions, it’ll be possible to join forces with firms that in the past might have been competitors in order to provide better consumer experiences and solve problems more efficiently for our customers,” says Johnson.

The driving force behind Western Union Business Solutions’ modernisation programme, Johnson helped launch WU Edge, the company’s digital platform and associated trading area for small and medium-sized businesses, in 2016, as well as Western Union’s payments solution for non-government organisations, who are often working in crisis conditions – the most demonstrable way it delivers on its brand promise to ’move money for better’.

Edge enables SMEs to expand their global reach by letting them send, receive and manage international payments in more than 130 currencies in 200 countries and territories, while also connecting them with each other: suppliers with buyers and customers with products as well as services.

Companies that sign up can link their dashboard to their WU holding accounts in various currencies, where they can initiate payments and integrate their accounting systems. By having greater visibility of all their accounts and contracts, and automating payment processes, Western Union says customers both increase productivity and gain confidence in their trading environment, as it extends them access to an international marketplace that in many areas of the developing world they probably thought unattainable.

And the key to all this is a collaboration with partners, says Johnson.

“We try to pull in data from as many sources as possible, through various partners, whether it’s an accounting package or, in the future, open banking APIs,” he says. “[This means] we have a richer sense of our customers’ overall financial picture and, ultimately, can provide them with advice so that they can make better decisions about their risk management and payment needs.

“Edge, for example, has a rich set of reporting capabilities that allow businesses to understand their payables and receivables over time, and then model what changes in exchange rates could do to the cost of those goods, or their bottom line if they’re selling.”

Opening up opportunities

The rise of open banking and, specifically in Europe, the revised Payment Services Directive (PSD2), enables third-party developers to create new digital financial management services.

By September 2018, all financial service providers and online retailers are expected to be fully compliant with the European Union’s PSD2 legislation, which will have two principle effects, says Johnson. The first will be that it mandates good practices around strong customer authentication.

“Many financial institutions have been very focussed on meeting the compliance needs of PSD2 first, making sure they have appropriate security and fraud prevention in their platforms and their APIs are ready.”

After that, he believes the onus will be on European banks – which PSD2 forces to share data with third-party financial service providers through open APIs – to take one of two approaches.

“I think the front-end experience is going to be critical here and the firms that have the most frictionless and seamless approach to user interface and user experience design will win,” he says.

Their other option is to become part of the financial plumbing – the infrastructure that supports frontends built by third parties.

“You can still win at plumbing,” says Johnson, “but you have to have flawless execution. You can’t get things wrong.”

Western Union is hedging its bets by adopting both strategies.

“I think customer tolerance for exceptions will decrease and so, as a financial institution, Western Union is investing in making sure we can process even more flawlessly than we already do while also building great user experiences for our customers,” says Johnson.

In the business services division, it does that by joining forces with its customers to solve their customers’ problems. This strategy recently delivered a solution for stressed-out students attending Temple University Japan Campus, allowing them to pay tuition fees and expenses in their preferred currency. With WU’s new international payment platform GlobalPay for Students, they can review payment options in advance using a price comparison tool and lock in exchange rates for up to 72 hours. They can then track their payment status through the WU online portal, with mobile messages and by email. The system uses an API to automatically input their details, including student number, name, invoice ID and amount of payment, provided by Temple.

In March 2019, Western Union struck another alliance to deliver Edge this time to Latin America, partnering with the virtual checkbook platform TuChequera to support the entrepreneur economy in Puerto Rico as it slowly rebounds from the disruption of caused by the 2017 hurricane that closed 5,000 to 8,000 businesses permanently. TuChequera hopes that by introducing customers to the WU payments platform, it can help the 44,000 that are left to look beyond their immediate trading environment and create new momentum for recovery, even reversing the economic migration that the hurricane has triggered.

“We listen to our customers, we listen to the staff that interacts with our customers, to understand what sort of needs they have. Then, once we identify a problem, we try to tackle it in the most innovative way possible,” says Johnson.

The question of DLT

Western Union has invested heavily in its frontend platforms and constantly iterates on user interface design, monitoring customer usage patterns to identify where they get stuck in order to smooth out any bumps in the experience.

“Users are here to make a transaction, or to hedge some FX risk, but that’s not their core business. So we want to make sure they can do it as quickly and efficiently as possible so that they can focus their time and effort elsewhere. Ultimately, we’re here to facilitate our customers’ business,” says Johnson.

While opening up to third-party data integrations undoubtedly creates opportunity, it also raises concerns about data security and trust. To address these, Western Union gives customers full control over where and how their data is being used. “We won’t go out to their bank without the customer giving us permission,” says Johnson. “And, similarly, when we’re offering our services to third parties, we’ll make sure the customer authenticates it and we’ll give them a strong set of controls to be able to turn off that tap if they lose trust in a partner.”

So, what of the future? Western Union is undoubtedly facing stiffer competition. TransferWise, one of a growing number of challenges, may have shifted only $5billion a month last year across 71 countries, but Odilon Almeida, president of Western Union Global Money Transfer admitted recently that ‘it’s a race and we are running very fast’. That will involve moving more money digitally, which, as of March 2019, includes using distributed ledger technology (DLT). A partnership with Thunes (previously known as TransferTo), a cross-border payments network for emerging markets, uses the Stellar blockchain to enable Western Union individual and corporate customers to send funds directly into mobile wallets around the world. Western Union has also tested Ripple technology for remittances in certain corridors.

One hundred and fifty years ago, Western Union sent a message over its telegraph system, confirming that cash had been deposited at one of its offices, so that funds could be released to the recipient at another. The technology has moved on, the distances are greater and the sums larger, but if this is a watershed moment in financial services, Western Union appears ready to meet it.