When Western Union sent its first telegrams across the frontiers of America in 1851, it struggled against companies with competing, incompatible technologies. Years of fierce wheeling and dealing helped Western Union acquire and neutralize rivals.
Then a prestigious 1860 contract to build the first coast-to-coast telegram system—which critics incorrectly said would never work—solidified the company's dominance. Even the eventual spread of the telephone and radio didn't derail the company, partly because by that time, Western Union had diversified from simply moving words to moving money, too.
In 2006, Western Union sent its last telegram. Today the $5.7 billion company makes most of its money from the fees it charges when people transfer funds and pay bills—and by hedging exchange rates for currencies in over 200 countries.
But a history of scrappy transformation doesn't guarantee the future. Western Union's business is conducted mainly in person, and in cash, in a world where money cards, digital currency and mobile payments are proliferating. A friend can pay you back for his bar tab with a text message. Bitcoins can buy you a spot on a Virgin Galactic rocket. Big banks, meanwhile, are horning in on Western Union's market: the estimated 2 billion people worldwide who don't have checking, savings or credit accounts.
To anticipate where new, profitable niches will emerge and to keep costs in line, Western Union must transform itself into a digital company. But it also wants to preserve the core business that has provided so much for so long. CEO Hikmet Ersek says he searched for months to find the right CIO to lead the effort. And two years into the job, that man, David Thompson, says Web and mobile technologies, along with a few irreplaceable proprietary systems, will be critical.
But, Thompson says, big data may matter most of all. Analytics could help Western Union sidestep the mistakes of familiar failures like Blockbuster and Borders. Understanding how people react to global migration pressures, geopolitical struggles, economic changes and natural disasters will shape Western Union's products and pricing, says Thompson, who is also executive vice president of global operations. "My team is starting to wake up to the fact that they're a partner in something that's really changing our company."
CEO Ersek is pleased with progress so far, but says, "We have a long way to go."
Upheaval in the financial services industry is being created by established players and entrepreneurs alike. Market-leading banks and credit unions offer mobile apps and on-the-spot loans. Startups are devising new ways to buy and sell with mobile phone swipes, scans and text messages. Bitcoins and other virtual currencies are now taken seriously by federal officials; Congress held fact-finding hearings on the topic in November.
Sign up for CIO Asia eNewsletters.