Western Union strategy centers on digital growth, Amazon pact

Western Union is in a "learning" phase as to how its digital advancements will connect with its physical locations, as well as what the Amazon partnership could lead to — and at least in this early stage, it appears to be succeeding.

Citing a 25 percent growth in digital transactions through WesternUnion.com, which generated more than $500 million in revenue for the full year, Western Union executives envision similar momentum in mobile.

The company has put considerable emphasis on building a digital and mobile component to its brand, resulting in an uptick in mobile transactions taking place through its remittance network.

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"We want account-to-account capabilities, but we also want omnichannel-to-omnichannel," Western Union chief financial officer Raj Agrawal said Thursday just ahead of the Englewood, Colo.-based money transfer company's fourth-quarter earnings report.

"The digital and retail worlds that we operate in really do complement each other, and the majority of the revenues we get in our digital business are from retail payout transactions," Agrawal said.

Such a change in company direction opened the door for Western Union to develop a partnership with Amazon that would not have been possible just a couple of years ago. Now, Amazon customers can pay for their purchases at physical Western Union locations, or through a Western Union payment option on the e-commerce checkout page.

"Our focus is not on the financial production of what we are getting there, because it is not going to be material for us this year," Agrawal said of the Amazon relationship. "But we are very focused on making sure customers are having a great experience and that the agents participating with us are providing that great customer experience."

Western Union is testing the Amazon payments service in 10 countries, mostly in Asia and South America. The partners have plans to expand in those current markets and plot a future expansion road map for the service, Agrawal said.

Western Union reported fourth quarter earnings of $212 million, after a $1.1 billion loss a year earlier. Revenue fell just short of expectations at $1.4 billion.

The consumer-to-consumer sector, which represents 80 percent of the total company revenue, had a 4 percent increase in transactions and a 22 percent increase in revenues. Website revenue delivered 12 percent of the total C2C revenue for the quarter.

Though Western Union officials have acknowledged the company continues to study the potential for a cryptocurrency service within its network, the topic did not come up during the Thursday earnings call. President and CEO Hikmet Ersek said last year that his company was not convinced it needed to add a cryptocurrency, citing the lack of consumer demand to add it as an option.

Western Union's digital growth helps distance itself from the legal battle it endured two years ago in settling with the U.S. government for more than $500 million on a charge that some of its agents enabled transactions connected to illegal activities like drug dealing and human trafficking on the network between 2004 and 2012.

"Most of the issues that were part of our legal settlements were from past issues, and since 2012 we have been investing $200 million a year in compliance and have well over 200 people in our compliance organization," Agrawal said.

"We are really proud of what we can do in compliance, and that is why you have companies like Amazon wanting to work with us," he added. "We have regulatory relationships around the world and look at it as a long-term competitive advantage."