Building on its earlier acquisition of alternative payments platform eBillme, Western Union (WU) announced a payment product that broadens its appeal beyond its traditionally unbanked consumer base.
It also boosts the company's appeal to banks.
"It definitely makes Western Union more of a partner to banks and it also helps prevent disintermediation by card or alternative payment companies," says Andy Schmidt, research director for global payments at CEB TowerGroup in Boston.
EBillme lets consumers make e-commerce purchases using their bank's online bill payment system. Consumers can do this without sharing a credit or debit card number with the merchant. EBillme does not require banks to promote or support its system, but it provides perks to those that do.
Western Union's new payment product, WU Pay, expands eBillme's capabilities, such as by allowing cash payments funded at a Western Union location. WU Pay will potentially appeal to two sets of customers, experts say. It lets Western Union's traditional base of unbanked or under-banked customers do more than transmit money. It also loops in an entirely new base of customers who already have bank accounts, but who are leery of purchasing online.
"One reason that some people don't shop online is that they want to pay with cash," or they have security concerns, says Beth Robertson, director of payments research at Javelin Strategy and Research.
Western Union had similar services before the acquisition, including online bill payment and electronic transfers through its Westernunion.com website. But those services were enabled primarily through a credit card or debit card.
"Whether [customers] use credit cards or WU Pay … the money goes from the bank to the merchant, and we are leveraging what the banks have built," Marwan Forzley, eBillme's founder, who heads up the WU Pay program with Western Union, says.
Customers can also use WU Pay for person-to-person payments, Forzley says.
In October Western Union, of Englewood, Colo., acquired the eBillme platform from ModaSolutions, of Rye Brook, N.Y. At the time of its purchase, EBillme was working with 800 online merchants and 17,000 online bill payment sites, according to Western Union.
"The benefit [of eBillme] is that consumers do not have to provide any specific account information to the merchant," Robertson says. "They authenticate it with the bank and the bank retains all that information."
Other benefits to the bank include using the cheaper automated clearing house network to make payments, experts say.
As non-bank companies like Google (GOOG) and eBay's (EBAY) PayPal make pitched attempts to offer consumers new ways to pay online and in stores, banks run the risk of losing customers and business. When the PayPal and Google brands are in front of the payment, banks have limited opportunities to cross-sell or otherwise communicate to consumers as they pay.
Western Union is offering something innovative to banks while burnishing its own credentials as an alternative payments provider that still has relevance, experts say. "This is an extension of their money transfers business into online payments, and a way to expand the applicability of their solution to the market," says Rick Oglesby, senior analyst with Aite Group.