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More and more people are moving out of their own countries these days, seeking better opportunities in terms of employment, business etc. The increase in immigration rates goes to show the growing number of people working in foreign countries. These people will need to send money to their relatives and family in their home country at a regular basis. There comes the need of an easy, fast and efficient means for transferring money safely to the destination. For this reason, numerous companies popped up. In this paper, we will discuss about Western Union- the world leader in money transfer and related services. With a presence in over 200 countries, Western Union is a pioneer in the field though it is facing stiff competition from various other similar organizations. To keep up with the growing demands of modern market and to fight competition effectively, innovative changes in business strategies are required. This includes the use of the services of Information technology and Information systems. Information systems have long been seen as a tool for gaining sustainable competitive advantage. The paper discusses the usage of IS/IT within Western Union with the need for better utilization of such services to gain competitive advantage over rival companies. The strengths and weaknesses of the company are carefully studied by carrying out competitor analysis and SWOT analysis.
Western Union – Overview
The Western Union is a financial services and communications oriented company based on the United States. The company which is spread over 240 different countries and territories has its headquarters in Montvale in New Jersey. The company generates revenues in excess of $5billions as of now.
Western Union was founded in 1851 by as The New York and Mississippi Valley Printing Telegraph Company (http://en.wikipedia.org/wiki/Western_Union). The company adopted the name ‘Western Union Telegraph Company’ in 1856, following a few acquisitions. The following years saw Western Union dominating the telegraph industry which marked the beginning of revolutionary changes in the communication era. It was in the year 1871 that the company introduced money transfer service. The initial service was largely based on the extensive telegraph network that the company owned. The following years saw telephone taking over the communication world. Western Union, after losing a lawsuit with Bell in 1879, began to concentrate mostly on the money business. The 20th century witnessed much innovative and technological advancement in operations from the company. In the year 1974, Western Union became the first American telecommunication company to own geosynchronous communication satellites by maintaining its own group of satellites to carry telegram and mailgram message data between Western Union offices nationwide.
Western Union began to divest its telecommunication assets during the early 1980s due to the increasing debts and sharply falling profits. In 1987, Investor Bennett S LeBow acquired WU and boosted the company’s capital base. This caused the company to undergo a major transformation from being a leading telecommunications provider to money transfer operations provider.
The company adopted the name ‘Name Valley Corporation’ in the year 1991 to protect against some legal proceedings and four years later merged with First Data Corporations. The latter announced a plan to spin WU off as independent and as a result, in 2006, the company become a truly independent publicly traded company and the focus of the company shifted entirely toward money transfer.
Western Union offers reliable money transfers across the globe with its slogan ‘Money in Minutes’. Typically, a person wanting to send money goes to a Western Union office and gives them the money opting for either the ‘Money in Minutes’ service or for the next day service. Sender also needs to provide the recipient’s name and payment city upon which he will be given a Money Transfer Control ID. This ID will be passed on to the recipient as well. The recipient can now go to any WU shop in the given city, provide the Money Transfer Control ID and personal ID to get the money. WU also provides a mobile based money transfer service in association with GSM.
Western Union is the world’s largest money transfer company in the world by means of transaction volume. The company has a market share of 17% as of Dec 2007, way ahead of its next largest competitor, MoneyGram International (6%). WU had £5.3billion in revenue as of 2008, with 85% of its revenues coming from direct ‘consumer-to-consumer’ transactions (direct money transfer between individuals). Consumer-to-business transaction accounted for the remaining 15% of the company’s revenue. The company also have a strong international reach, which is evident from the fact that 65% of its revenues (for the year 2007) are contributed by international money transfers.
The global economic condition is one factor which hugely influences the money transfer industry. An analysis of the company’s revenues in the year 2008 shows that the poor economic conditions which prevailed in the US/Mexican markets caused a dip in revenue from these regions. On the other hand, revenues shares from emerging economies like China and India grew substantially (37% and 44% respectively). Also, it us found that the figures of global remittances (money sent within countries) almost doubled during the period 2002-2007. This surge in demand for money transfers has also meant more intense competition from competitors. Competitors like MoneyGram, American Express and PayPal are all keen to put their hold in the market. The coming years could see fierce competition in this sector.
All operations of Western Union falls under two broad categories:
1. Consumer-to-consumer (C2C): This has traditionally been the major business sector for Western Union. This includes direct money transactions between private individuals. A major part of customers in this category are immigrants who sent money to their relatives across the world. Revenue from this type of transactions has been increasing steadily over the years. MoneyGram International and American Express are the major competitors for WU in this category
2. Customer-to-business(C2B): This category of transaction allows customers to pay bills and transactions through various means. The revenues from this category accounts for only 15% of the total revenue of WU (for the year 2007). Competitors in this category include e-bay’s PayPal which is a secure internet based electronic payment system.
Western Union has strategic alliances with banks and financial institutions all over the world. On 2008 October, WU also entered into an important strategic alliance with Orascom Telecom Holding (OTH), “to pilot mobile money transfer services in its key markets”. This alliance helped to initiate mobile remittance services in select countries and was aimed at providing frequent, low-principal mobile remittance service to its customers wanting to send money all over the world. This alliance was part of the Western Union-GSM association aimed at providing high speed cross-border money transfer services over the mobile.
Fraud activities and scams over the internet have caused problems with money transfer through Western Union. Scammers have been able to hijack Western Union services in the past and money thus lost, in most cases were irrecoverable. Western Union has to deal with this problem effectively or it might lose some serious market share. The company had received numerous complaints regarding online scams.
WU, recently has started a mechanism to block transactions based on suspicious terrorist connections. This effectively meant that the company sometimes block transactions where the recipient had Arabic sounding names. This has created troubles for numerous ‘real’ customers.
Identifying the competitors is very important for any business firm. Analysis of the competitor’s strategy is very essential to formulate an effective business strategy. In the case of industries with a niche product, identifying competitors becomes crucial. Competitor analysis involves the gathering of information of one’s competitor and using this information to predict their behaviour. There are different types of competitors that a business may across. These are:
1. Direct competitors:
These are businesses that offer identical or similar products as your business. Direct competitors are direct threats to the company and can seriously affect the company’s market share in the business.
2. Indirect competitors:
These are businesses which offer products that can be used as substitutes to your products. Though such products may not be targeting your market directly, they can offer alternatives which can sometimes prove harmful. In the case of Western Union, we can consider Thomas Cook
3. Future Competitors:
Businesses which, at the moment, do not compete with your company-directly or indirectly, but can affect your business in the future.
MoneyGram International, Inc is a US based company financial services company. Headquartered in Minneapolis, this company operates in over 170 destinations worldwide offering its products and services through a network of more than 100,000 agents along with other financial institutions
The history of the company dates back to 1940. MoneyGram Payment Systems, Inc. was a part of American Express until it was acquired by The Travelers Express Company, Inc in 1998. The company became MoneyGram International following a spin-off in 2004. MoneyGram International provides services like money transfer, money orders and bill payment to its customers. A separate wing of the company provides payment processing services to financial institutions. Recently, the company started a new mechanism which allows customers to transfer money through mobile devices. The company is a direct competitor to Western Union Co in that both operate in the same domains. MGI offers money transfer at comparatively lower prices than WU and is eyeing the large market share of WU. With a market share of 6%, the MGI is the only major direct competitor for WU in the business.
The following table provides a competitor analysis of Western Union Co. The table gives a good understanding of the relative strengths and weaknesses of Western Union Co and its major competitor- MoneyGram International, Inc.
FACTOR Your Business Strength Weakness Competitor A Competitor B
Products and services offered Money Transfer Fast, Brand name Cost MoneyGram
Market share 17% Worldwide 6%
Global visibility (locations of operation) Worldwide N.A N.A N.A
Organisation’s mission/vision Fast &Reliable money transfer – – –
Price range High – – Pretty high
Reliability Good – – Good
Quality Medium – – –
Expertise Money transfer Money transfer, bil payment
Company Reputation Good – – Good
Sales Method Online ,Mobile, Person – – Agent, Online
Strategies used – – –
IS/IT used and for what purpose Website, IS for
Cost cutting – – –
Innovations/patents Mobile money transfer Mobile remittance
any other factors
Fig: Competitive Analysis of Western Union (adapted from http://www.score.org/downloads/Competitive%20Analysis.doc)
SWOT Analysis: SWOT analysis is a management technique used to identify and evaluate the Strengths, Weaknesses, Opportunities and Threats involved in a business. SWOT analysis gives a comprehensive set of information which can be used to review the performance of a given company. A SWOT analysis of Western Union has been carried out here:
• World’s largest money transfer company in terms of transaction volume, with a market share of 17% (2007) and a revenue of $5.3billion (2008). The major competitor of the company (MoneyGram Intl.) has a market share of 6%.
• Very good international growth rate and global presence.
• Western Union is one of the most expensive money transfer services.
• Comparatively weak customer-to-business (C2B) market. Competitors like PayPal are really moving ahead in this direction.
• Online scams and frauds
• International spread and growth has been crucial to the success of Western Union. Profits can be maximized if the company take steps to further increase their management and physical presence outside US to the rest of world. Steps can be taken to put their stranglehold in the growing Indian and Chinese markets.
• The vast potential of C2B is still to be untapped.
• Mobile money transfer facility can bring in a whole lot of changes and new revenue.
• Competition in the money transfer sector is growing. Competitors like MoneyGram International have already marked their entrance into the field.
• Western Union money transfer being expensive can cause competitors offering cheaper service to put foot on the market. The company can consider competitive pricing for its services.
Strategic use if IS/IT in the business
Business operations today depend a lot on Information Technology. Information technology has really changed the whole aspect of business. Modern day businesses make extensive use of IT and related services. Organizations require the service of IT of gain competitive advantage over a rival company, to outsmart them by making use of the immense potential of internet in various operations and undertakings.
Bocij,P et al, 2008 says “Computer based IS are now used to support all aspects of an organizations functions and activities. New technology creates new opportunities for forward thinking companies. Higher levels of automation, high speed communication and easy access of information can all provide significant benefits to a modern business organization.”
Western Union Money Transfer, being a world leader in the money transfer business, is already a heavy consumer of IT and related services. The company provides it’s ‘Money in Minutes’ service online so that customers across the globe can make use of the internet to make payments to their friends and relatives across the world, within minutes.
Security has always been a major issue with internet money transactions. Phishing (using fake e-mails), spoofing (fake websites), identity theft etc has been traditionally associated with online money transfers. Internet scams and fraud activities caused serious troubles to WU customers over the years. Money lost to such scams has often been irrecoverable especially when the money gets transferred to an overseas location. Large number of online scams and frauds has brought about a change in policy by the Western Union. Now users wanting to transfer money online have to either register or sign-in to the service, pay the amount and maybe required to talk with one of the representatives of the company to confirm the transaction. Also Western Union monitors account activities for any suspicious transactions and blocks them. Western Union has to find out a decent hassle-free solution to this problem, if they want to continue being a world leader in money transfer services. Competitors like PayPal, with better electronic security features may attract more customers toward them.
It is imperative for modern business organizations to make proper use of IS/IT tools and strategies. Western Union, being a world leader in money transfer and financial solutions, has to find ways of optimizing its business by better use of IS/IT strategies. Providing fast and reliable online money transfers across the globe is certainly a big business deal and Western Union must be able to provide a secure means for its customers for doing the same. The C2B division of business can go a long way through, if this is made possible. For Western Union to maintain its market share and leader position, efficient use of IT is required.
Bocij, P., Greasley, A. & Hickie,S.(2008), Business Information Systems :Technology, Development and Management for the E-Business.Third Edition. Edited by Greasley. Prentice Hall
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http://en.wikipedia.org/wiki/Western_Union (Accessed 22 Aug 2009)
Send Money Options – MoneyGram (Online)
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Western Union Company (WU)
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Mobile Money Transfer Fact Sheet
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(LSE, 2008), Orascom Telecom announces strategic alliance with Western Union to pilot Mobile Money Transfer services (Online) http://www.londonstockexchange.com/exchange/prices-and-news/news/market-news/market-news-detail.html?announcementId=1997795 (Accessed 22 Aug 2009)
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Western Union faces growing competition (Online)
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” Security Features Of Western Union ” (Online)
http://aboutmoneytransfer.com/Safe-money-transfer-by-western-union.html (Accessed 22Aug 2009)
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