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Western Union said Tuesday that it is buying the business payments unit of London-based Travelex Holdings for £606, or about $1 billion.
July 5 -
Regions Financial Corp. will offer person-to-person and bill payment services at 1,700 bank locations later this year through Western Union Co.'s money transfer platform.
June 28 -
Online Resources Corp. is working with Western Union Co. to offer an expedited payment service to online banking users, the companies are expected to announce Monday.
April 4 -
Western Union Co. has rolled out a mobile Web version of its foreign-exchange payment service that enables small and midsize businesses with international ties to conduct transactions using smartphones.
March 4 -
Western Union Co. is working with the prepaid card distributor InComm Inc. to offer a Western Union reloadable card. The MoneyWise card will be available initially through the 150,000 locations for retailers that partner with InComm in the U.S.
January 26
Western Union Co. has struck a deal that will make it a competitor, and also a potential partner, for banks trying to capture a bigger chunk of the business payments market.
The company said Tuesday that it is buying Travelex Holdings Ltd.'s global business payments division for about $975 million, as it tries to expand beyond the consumer remittance services that are its bread and butter.
The deal, which is expected to close this year, would remove Western Union's largest nonbank competitor in the cross-border business-to-business payments market.
The move comes at a time when banks have been trying to strengthen ties with small-business customers by tailoring treasury management systems built for large corporations for these clients.
"There has been a growing demand in the small and middle-market space … for the ability to make international payments effectively and easily," said Mark Webster, a partner with the consulting firm Treasury Alliance Group LLC. "A lot of banks have been looking at that space and saying, 'How do we do it effectively?'"
Hikmet Ersek, the president and chief executive of Western Union, said in an interview that it would use the same agent model in business payments as it does on the consumer side.
"What the banks are doing is they use us to serve their [small and midsize business customers] and say, 'OK, why don't you use Western Union Business Solutions to transfer the money or receive the money' and we pay the banks a commission for that," Ersek said.
In addition to the 1,000 financial institutions already working with Western Union on consumer payments, the acquisition of the Travelex unit also adds 500 banks globally that will be using its business services, Ersek said.
The company will seek partnerships with small and midsize banks that lack the scale to offer international payment services.
"We also know that we probably won't play a role in big corporations, big companies who they already have an established service where they transfer" money globally, Ersek said.
Webster agreed that smaller banks are likelier partners for Western Union.
"The bigger banks … have been salivating and working very hard on international remittances and that whole market," he said. "The smaller banks have been saying, 'Well, gee, we want to be able to compete because we don't to lose that,' so there may be some willingness to use a third-party provider."
Western Union said small and midsize businesses represent a roughly $24 billion revenue opportunity, citing statistics from McKinsey & Co. and its own estimates.
The Englewood, Colo., company has worked with banks on the consumer payments side of its business, using them to expand its network of 450,000 agent locations worldwide where customers can go to send and receive money and pay bills. For example, last week Regions Financial Corp. said it would offer Western Union money transfer and bill payment services at 1,700 of its locations in 16 states.
Given Western Union's experience in risk management, having had to meet anti-money laundering and other compliance requirements, the company is well equipped to expand its business payments operation, said Andrew Jeffrey, an analyst with SunTrust Robinson Humphrey.
The Travelex acquisition "does give them scale and give them reach," Jeffrey said. "I don't think it changes the competitive environment visa vis the banks. I think the banks would like to offer the services more downstream."
Western Union established its business platform with the 2009 acquisition of Custom House Ltd., a Canadian company that offered international business-to-business payments services.
In the first quarter, global business payments generated $182.1 million in revenue, dwarfed by consumer payments, which generated $1.08 billion in revenue. Western Union is scheduled to report second-quarter results on July 26.
As a result of the Travelex acquisition, the company expects to generate $400 million in revenue from business payments in 2012, Ersek said on the conference call.
The deal will also increase the number of countries in which Western Union offers its business services to 16 from nine and create a total sales force of 450 people, Ersek said.
