Western Union is the largest money transfer company in the world.
Now it has set its sights on mobile delivery.

Every year people send literally billions of dollars all over the globe electronically. More and more of that money is being sent using mobile phones.

As an example, Western Union had revenues of $4.1 billion in 2007 transferring money for individuals, most of that on transaction fees and commissions. The company says a significant portion of that revenue was for international money transfer, and Western Union is the largest cash-to-cash money transferring business in the world.

Matt Dill, general manager of Western Union’s mobile business unit, declines to say how big a portion of its money transfer business is done with mobile phones. But he does say Western Union has seen a rapid increase in that sector since the end of 2006, a year that saw the company transfer $53 billion in cash from individuals in developed countries to those in developing economies.

That money is being sent mostly by residents of developing countries who have jobs in other parts of the world. The top four countries, in terms of receiving consumer money transfers, are India, China, Mexico and the Philippines.

PHONE HOME
Western Union has transformed itself from a company that delivered telegrams to one that delivers money, with its current business ignited by migrants who move to developed countries and send money back home, Dill says. That normally has been done through the company’s network of some 335,000 agent locations around the world, with people handing over cash in one location, with notification sent to another agent where the transfer is completed. Western Union uses its own network to make the transfers.

Western Union used to give its customers prepaid phone cards so that customers could call their friends and families on a landline and tell them a money transfer had been made. But Dill says mobile phone penetration has increased so much, especially in developing countries, that customers no longer use prepaid cards.

These developing countries, meanwhile, don’t have a widespread financial structure. Dill says there are few banks and credit card use is low. Mobile operators have an opportunity in those countries to provide financial services, he says, but haven’t had the technology to provide it.

Western Union has partnered with the GSM Association (GSMA) to develop and implement the technology and service to provide money transfer services globally. The service, which falls under the GSMA’s Mobile Money Transfer program, is expected to be available in the second quarter of 2008.

Rob Conway, CEO of the GSMA, said in a statement the association believes carriers have an “unprecedented opportunity” to provide financial services to their customers. “Mobile transfers area key driver in the development of a potentially vast market for financial services delivered via the mobile phone,” Conway said.

MOBILE PAYMENT INTEGRATION
Western Union plans to integrate the mobile payment technology into its existing services, enabling cash-to-mobile, mobile-to-mobile and mobile-to-cash money transfers across borders. It will start with cash-to-mobile transfers, Dill says. There are 35 GSMA member operators, with 800 million customers in 100 countries, participating in the program. The head of the GSMA program is Sunil Mittal, chairman and managing director of India’s Bharti Airtel.

“Remittances are playing a vital role in the social and economic development of India and many other developing countries,” Mittal says. “This initiative will bring down the cost of lower-value and high-frequency mobile remittances considerably and also enable smaller amounts to be transferred in a fast and secure fashion, thereby benefiting millions of people in the developing world.”

Bharti Airtel and two Philippine carriers, Globe Telecom and Smart Telecom, have launched pilot programs with Western Union already. The carriers will act somewhat like one of Western Union’s current agents, collecting a portion of the remittance fee to enable the transaction.

Dill says more than 44% of Filipino households have a family member working abroad, and those workers use their mobile phones to stay in touch. About $17 billion (U.S.) was transferred into the Philippines in 2007.

The mobile money transfer market is just getting started globally, Dill says, but has caught on in countries like the Philippines. There are more than 8 million Filipinos who work outside their country, many of them sending money home.

Smart Communications already has its own mobile financial system, which was used by 7 million of its 30 million subscribers last year. Globe Telecom has a similar system which its subscribers use to load cash value onto a phone and then use that to pay bills, buy merchandise at participating stores or to make person-to-person transfers.

Western Union’s mobile money transfer technology also was deployed last year in the United States in a partnership with the MVNO Trumpet Mobile, which is available through some Radio Shack stores. Trumpet Mobile has a mobile banking service provided by Affinity Mobile and its “Mobile Application Delivery Enablement” (MADE) platform. Western Union does the actual money transfer for the service.

There are a number of operators globally, mostly in developed countries, that have started offering banking services, along with a number of providers. Some of these offer money transfers. Visa and MasterCard both offer money transfers using their credit capabilities.

Dill says Western Union knows there are a number of companies with money transfer solutions but that Western Union wants to work with all of them as an underlying platform. The company can integrate its platform with other solutions.

“We believe long-term that focusing on platforms for consumers is better than competing against others,” he says.