Western Union Co. is stepping up its efforts to persuade bankers to view it as a partner, rather than a rival, in capturing remittance business.
The Denver company announced Monday that Fidelity National Information Services Inc. has agreed to offer Western Union international transfer services to the technology vendor's 8,500 U.S. bank clients.
"We're making efforts to expand our business to capture more of the prepaid business and the banking business," Stewart Stockdale, an executive vice president at Western Union and its president of the Americas, said in an interview Friday. "We're being very public about our interest in banks, and we're open for business."
This is the company's second agreement in a month aimed at delivering its services through banks. Last month U.S. Bancorp said Western Union would replace MoneyGram International Inc. in May as its provider of money transfers at all its branches.
Stockdale said these agreements will give Western Union access to customers outside its traditional base of "underbanked" consumers, who rely on supermarkets, payday lenders and other alternative providers of financial services.
This is an "opportunity to leverage existing relationships that Fidelity has with almost the entire banking system in the United States," Stockdale said. "They're reaching many banks that we're not talking to."
Bankers are showing increased interest in offering remittances. In February, Wells Fargo & Co. called on fellow banking companies to deliver such services, saying that if more of them moved into the market, consumers would think about going to a bank to send money abroad, instead of visiting a remittance company.
However, Gwenn Bezard, a research director at Aite Group LLC, said in an interview Monday that expanding into remittances can be tough for banks. "Some large banks over the last few years have tried to go it alone. They have not been very successful."
One important hurdle is the lack of an international agent network to distribute payments; Western Union has 375,000 agent locations worldwide, he said, and "replicating that is not easy."
For most banks, partnerships with companies such as Western Union or MoneyGram will prove to be more effective than building a service from scratch, Bezard said. Offering remittances "is not a great customer acquisition tool, at least in the U.S., but it has proven very valuable as a customer retention tool."
Aite projected in a report issued Monday that cross-border workers' remittances would fall 7.3% this year, to $368 billion, because of the poor global economy. Earlier in the decade the market had been growing at an annual rate of 15% to 18%.
Kimberly Gartner, an associate director at the Center for Financial Services Innovation, a nonprofit arm of ShoreBank Corp. said that for most banks, partnering with a remittance company is the easiest way to deliver such services. "We've certainly seen the largest banks building their own, but that doesn't make economic sense for most of the industry."
Stockdale said Western Union's services would be optional for Fidelity's banking clients. "It's going to take a few days to weeks to roll out. I think that the lead time's going to vary between the large, small and midsize banks, but we would hope to start signing banks very shortly."
He would not give a value for the multiyear agreement.
Anthony Ficarra, the executive vice president of Fidelity's eBusiness unit, said in a press release Monday that the Jacksonville, Fla., company views "Western Union as a strong and strategic fit in providing our clients and their customers with the convenience of a well-established and strong Western Union agent network to easily transfer money to family and friends."
(Fidelity, which was the No. 2 vendor on American Banker's FinTech 100 list last year, announced an agreement this month to buy Metavante Technologies Inc. of Milwaukee, which was No. 10 on the list. The deal is expected to close next quarter.)
Remittance partnerships are just part of Western Union's plans for expanding its relationships with banks. It also plans to offer an expedited service for banks' online bill payment customers.
Over the last dozen years Western Union has built an online network that reaches more than 6,000 billers in the credit card, mortgage, utility, insurance and other industries, mostly for the companies' own biller-direct sites, call centers and interactive voice response systems, according to Steven Kramer, a vice president at Western Union Electronic Payment Services. "We're taking something that we've been doing for all these years and looking at it from the other end."
