These changes portend a "moment of creative destruction," says Lisa Servon, a professor at The New School who focuses on economic development and urban poverty. "Western Union sees the writing on the wall and, like everyone, is trying to figure out how to leverage new technology to improve their own services."
The question is whether Western Union will be fast and bold enough to emerge as a winner in the game of digital disruption. A slew of startups are clamoring to topple Western Union in the money-transfer business (see "Their Mission: Disrupt Western Union," below). "Establishing an infrastructure to operate legally and efficiently in a variety of countries will take some doing for startups," says Denee Carrington, a senior analyst at Forrester. "But Western Union can't just count on the fact that it's hard to insulate them forever."
Western Union's Ersek contends the company is already digital internally, conducting an average of 28 transactions per second. The real change the CEO wants is in extending digital capabilities to customers directly. But timing is everything. If Western Union overhauls basic customer interactions by throwing a lot of new technology at consumers, it risks alienating and losing them.
If the company moves too slowly, competitors will steal customers. Analyzing customer behavior will help Western Union find the right pace, he says, reeling off a series of IT-based ideas, such as analyzing what customers do in social media and measuring the results of online and mobile marketing campaigns.
Details, details, details are important to him, to hone strategy. "We want to know when a Filipino customer in the U.K. goes to church on Sunday," he says, by way of example. That way, Western Union can create customized products based on those life details. The Philippines is one of the most popular destinations for money transfers. Maybe a customer is in a family mood after church and will send money back home if offered a Sunday discount. "Not many companies have such global data."
Western Union's customers are both an asset and a risk. They don't have bank accounts for a variety of reasons. Maybe they're unemployed or they've abused accounts in the past. Maybe they have too little money to open an account. Maybe they can't or don't want to provide Social Security numbers.
Eight percent, or more than 25 million, of the 317 million people in the U.S. don't have bank accounts. In low-income areas, that number is much higher: In the south Bronx in New York City, it's 50 percent. The unbanked market in the U.S. alone is worth $78 billion, estimates the Center for Financial Services Innovation, a nonprofit group that promotes public policies to help the underserved.
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