Western Union History Milestones: From Telegraph to API
In the past ten years, non-cash payments and e-wallets have become increasingly popular. With a plastic card or electronic money, you can now pay almost everything: air tickets, utilities, communications, goods in online stores, and so on. The role of cash is decreasing every year, and it is beneficial for both financial institutions and government agencies, for which control over the movement of financial flows is simplified.
But such an archaic structure as Western Union - a company that provides transfer services most often cash, still continues to exist. To say more: Western Union is not going to give up and with all the pressure of modern realities on its traditional business, which is inextricably linked to cash, it is doing everything in order not only to survive, but to remain one of the giants of the sector.
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But first things first.
With the development of commodity-money relations and the emergence of business on a global level, the need arose for the safe and fast transfer of money over long distances. If before the 18th century, this was possible only in person, then from the 1700s, a network of first banks, usurers and guarantors emerged around the world, which for a certain percentage could ensure the safe transfer of funds over very large distances.
The first money transfers began to be carried out on the territory of Russia in 1781 using mail. A feature of the new system was that instead of physically sending each transfer over long distances, the payee was sent a voucher from the checkbook, which was later cashed out. With the development of telegraph, the geography of transfers has gone beyond the boundaries of individual postal services and has acquired a global character.
One of these telegraph companies, which later focused on remittances, was Western Union. It can rightly be considered a titanium of the financial industry, which is nothing about revolution, war, and change of government: WU has experienced all this and more than once.
What we know today as the largest cash transfer operator began in the 19th century with a telegraph company. In 1851, the Americans Hyrum Sibley and Samuel Selden abandoned the overall business strategy of building new telegraph lines, which were then more than enough, and decided to buy out smaller networks and merge them into one large one. The new player in the telegraph market was named the Mississippi Valley Printing Telegraph Company (NYMVPTC), and in 1858 was renamed Western Union. It should be noted that initially Western Union was engaged in sending telegrams - the company came to remittances later. More information about the history of the formation of the WU before the 20th century can be found here . We will talk about a stage much later - the second half of the 20th century until today.
The modern world stands on the shoulders of information technology. With the development of communications, the laying of fiber optic data networks and the development of the Internet, a significant part of the financial sector has gone into the “digital” space. Today, the overwhelming number of transactions for the payment and transfer of funds between counterparties is carried out through a bank transfer. But cash is still popular with the population, and for some regions with oppressed banking infrastructure it is the only payment instrument.
According to the Central Bank of the Russian Federation, about 38.66 trillion rubles circulate in the Russian economy, of which 7.77-8 trillion is “only” in cash. Against the background of the total amount, the share of cash is already small, but in absolute terms it is a huge figure.
Western Union has always focused on serving individuals. Until recent years, the company has successfully existed in a rapidly changing global financial market due to an extensive affiliate network of transfer and acceptance points throughout the world. WU is still the most important means of transferring funds to exotic countries, especially to the states of central Africa or southeast Asia, where there are terminals and banks only in large cities, if there is one at all. The Western Union service, on the other hand, allows you to receive money the very next day, while paying a completely standard fee, comparable to that of banks.
Western Union began to beat the soil from under the feet of electronic currencies and services. If in the field of work in remote regions Western Union has no worthy opponents, then in more prosperous countries the giants are more aggressively squeezed out by younger and more aggressive competitors. Western Union also began to lose popularity due to the growth of non-cash payments among the population of the largest economies of the world. This is in Russia or the CIS countries on payday, we can observe queues at ATMs, when people massively transfer their salaries from plastic to cash. And, for example, in China, non-cash transfers between individuals and the payment of all that is possible from electronic wallets is already a reality. A similar policy is being actively promoted by the Chinese authorities, who are saving a lot of money on printing banknotes for almost a half billion people in the country.
In October 2006, Western Union entered the IPO. At that time, the company was estimated at $ 15 billion. By the beginning of September 2008, the company's securities showed growth, and WU's capitalization reached its peak - $ 20.53 billion. After this mark, a serious decline began. Over the past nine years, the giant has "lost" more than twice - now the capitalization of WU is estimated at $ 8.99 billion. The company has reached its personal bottom on November 7, 2012. Then the capitalization of Western Union was only $ 7.48 billion.
Source: YCharts // Western Union capitalization schedule for the entire history of trading on the NASDAQ
In the world of cashless transfers and mass use of plastic, Western Union had to adapt to modern realities. At the same time, the company chooses its own strategy for various regions. So, now a money transfer can be issued online on the site using the Internet banking system or using a plastic card, and for each state offers its own additional options. For example, in the case of Russia, this is the possibility of using Yandex.Money, and on the official website for the United States, the user can switch the page language to Spanish. Such options are due to the fact that the transfer of cash through Western Union is extremely popular among labor migrants. This is the reason for the fact that on the Russian version of the site in the list of directions for transfers, Ukraine, China, Russia, Belarus, Uzbekistan, Kazakhstan first go and then all other countries in alphabetical order.
But working with individuals is not the only area of ​​interest for Western Union. Not so long ago, the company announced the release of its own API , which anyone can connect to.
In exchange, Western Union offers functions for receiving payments worldwide (up to 10,000 transactions per call), tracking transactions and their status in real time, crediting to an account and other services. All this, together with a huge network of Western Union partners, which the company has built around the world over the years, in the long term allows the company to reach the next stage of its development. The backbone of API users, Western Union are seen by eCommerce representatives.
In fact, Western Union is now entering the financial services market for businesses, while opening up access to its own infrastructure. The company believes that the new system will reduce the cost of cross-border transfers - the most expensive type of operations. Now Western Union is working at a rate of 1.5% to transfer funds (or the minimum commission, for the Russian Federation - 60 rubles). This rate is comparable to the rate of interbank transfers within one financial ecosystem, for example, within one state. The rate of cross-border transfers, in addition to the “interest” of the bank in the amount of 1-1.5% of the transaction amount, is also formed from the commissions of payment systems and the acquiring bank that accepts the payment (transfer). Due to the fact that in order to pay for goods or services abroad, it is necessary to involve at least three structures (the issuing bank, the Visa / MasterCard payment system and the acquirer bank), the final payment (transfer) cost increases to 2.2-3 and more percent.
So why is API Western Union competitive? If the company can keep the current rate of 1.5% or at least less than 2%, then the system of the company will become very attractive for the eCommerce segment, and more specifically, for sellers working in several regions or in general around the world. Another plus API - centralization and transparency of transactions. Now, when conducting cross-border remittances, money may “freeze” at an intermediary between the issuing bank and the acquiring bank. Many know the situation when the sender's bank processed the payment, and the recipient's bank still does not even see the transaction - that is, the money from someone “in the middle”. In the case of the WU API, such problems should not arise due to the complete transparency of all stages of the transfer and the money transfer system worked out over the years within one to two days. This is possible now only in the case of blockchain technologies, however, cryptocurrency does not have such a huge infrastructure for cashing out or crediting to an account, like Western Union.
The history of a century and a half ago with the use of available capacities in the new format is repeated.
But such an archaic structure as Western Union - a company that provides transfer services most often cash, still continues to exist. To say more: Western Union is not going to give up and with all the pressure of modern realities on its traditional business, which is inextricably linked to cash, it is doing everything in order not only to survive, but to remain one of the giants of the sector.
')
But first things first.
History reference
With the development of commodity-money relations and the emergence of business on a global level, the need arose for the safe and fast transfer of money over long distances. If before the 18th century, this was possible only in person, then from the 1700s, a network of first banks, usurers and guarantors emerged around the world, which for a certain percentage could ensure the safe transfer of funds over very large distances.
The first money transfers began to be carried out on the territory of Russia in 1781 using mail. A feature of the new system was that instead of physically sending each transfer over long distances, the payee was sent a voucher from the checkbook, which was later cashed out. With the development of telegraph, the geography of transfers has gone beyond the boundaries of individual postal services and has acquired a global character.
One of these telegraph companies, which later focused on remittances, was Western Union. It can rightly be considered a titanium of the financial industry, which is nothing about revolution, war, and change of government: WU has experienced all this and more than once.
What we know today as the largest cash transfer operator began in the 19th century with a telegraph company. In 1851, the Americans Hyrum Sibley and Samuel Selden abandoned the overall business strategy of building new telegraph lines, which were then more than enough, and decided to buy out smaller networks and merge them into one large one. The new player in the telegraph market was named the Mississippi Valley Printing Telegraph Company (NYMVPTC), and in 1858 was renamed Western Union. It should be noted that initially Western Union was engaged in sending telegrams - the company came to remittances later. More information about the history of the formation of the WU before the 20th century can be found here . We will talk about a stage much later - the second half of the 20th century until today.
Modern western union
The modern world stands on the shoulders of information technology. With the development of communications, the laying of fiber optic data networks and the development of the Internet, a significant part of the financial sector has gone into the “digital” space. Today, the overwhelming number of transactions for the payment and transfer of funds between counterparties is carried out through a bank transfer. But cash is still popular with the population, and for some regions with oppressed banking infrastructure it is the only payment instrument.
According to the Central Bank of the Russian Federation, about 38.66 trillion rubles circulate in the Russian economy, of which 7.77-8 trillion is “only” in cash. Against the background of the total amount, the share of cash is already small, but in absolute terms it is a huge figure.
Western Union has always focused on serving individuals. Until recent years, the company has successfully existed in a rapidly changing global financial market due to an extensive affiliate network of transfer and acceptance points throughout the world. WU is still the most important means of transferring funds to exotic countries, especially to the states of central Africa or southeast Asia, where there are terminals and banks only in large cities, if there is one at all. The Western Union service, on the other hand, allows you to receive money the very next day, while paying a completely standard fee, comparable to that of banks.
Western Union began to beat the soil from under the feet of electronic currencies and services. If in the field of work in remote regions Western Union has no worthy opponents, then in more prosperous countries the giants are more aggressively squeezed out by younger and more aggressive competitors. Western Union also began to lose popularity due to the growth of non-cash payments among the population of the largest economies of the world. This is in Russia or the CIS countries on payday, we can observe queues at ATMs, when people massively transfer their salaries from plastic to cash. And, for example, in China, non-cash transfers between individuals and the payment of all that is possible from electronic wallets is already a reality. A similar policy is being actively promoted by the Chinese authorities, who are saving a lot of money on printing banknotes for almost a half billion people in the country.
In October 2006, Western Union entered the IPO. At that time, the company was estimated at $ 15 billion. By the beginning of September 2008, the company's securities showed growth, and WU's capitalization reached its peak - $ 20.53 billion. After this mark, a serious decline began. Over the past nine years, the giant has "lost" more than twice - now the capitalization of WU is estimated at $ 8.99 billion. The company has reached its personal bottom on November 7, 2012. Then the capitalization of Western Union was only $ 7.48 billion.
Source: YCharts // Western Union capitalization schedule for the entire history of trading on the NASDAQ
In the world of cashless transfers and mass use of plastic, Western Union had to adapt to modern realities. At the same time, the company chooses its own strategy for various regions. So, now a money transfer can be issued online on the site using the Internet banking system or using a plastic card, and for each state offers its own additional options. For example, in the case of Russia, this is the possibility of using Yandex.Money, and on the official website for the United States, the user can switch the page language to Spanish. Such options are due to the fact that the transfer of cash through Western Union is extremely popular among labor migrants. This is the reason for the fact that on the Russian version of the site in the list of directions for transfers, Ukraine, China, Russia, Belarus, Uzbekistan, Kazakhstan first go and then all other countries in alphabetical order.
Another adaptation to market needs
But working with individuals is not the only area of ​​interest for Western Union. Not so long ago, the company announced the release of its own API , which anyone can connect to.
In exchange, Western Union offers functions for receiving payments worldwide (up to 10,000 transactions per call), tracking transactions and their status in real time, crediting to an account and other services. All this, together with a huge network of Western Union partners, which the company has built around the world over the years, in the long term allows the company to reach the next stage of its development. The backbone of API users, Western Union are seen by eCommerce representatives.
In fact, Western Union is now entering the financial services market for businesses, while opening up access to its own infrastructure. The company believes that the new system will reduce the cost of cross-border transfers - the most expensive type of operations. Now Western Union is working at a rate of 1.5% to transfer funds (or the minimum commission, for the Russian Federation - 60 rubles). This rate is comparable to the rate of interbank transfers within one financial ecosystem, for example, within one state. The rate of cross-border transfers, in addition to the “interest” of the bank in the amount of 1-1.5% of the transaction amount, is also formed from the commissions of payment systems and the acquiring bank that accepts the payment (transfer). Due to the fact that in order to pay for goods or services abroad, it is necessary to involve at least three structures (the issuing bank, the Visa / MasterCard payment system and the acquirer bank), the final payment (transfer) cost increases to 2.2-3 and more percent.
So why is API Western Union competitive? If the company can keep the current rate of 1.5% or at least less than 2%, then the system of the company will become very attractive for the eCommerce segment, and more specifically, for sellers working in several regions or in general around the world. Another plus API - centralization and transparency of transactions. Now, when conducting cross-border remittances, money may “freeze” at an intermediary between the issuing bank and the acquiring bank. Many know the situation when the sender's bank processed the payment, and the recipient's bank still does not even see the transaction - that is, the money from someone “in the middle”. In the case of the WU API, such problems should not arise due to the complete transparency of all stages of the transfer and the money transfer system worked out over the years within one to two days. This is possible now only in the case of blockchain technologies, however, cryptocurrency does not have such a huge infrastructure for cashing out or crediting to an account, like Western Union.
The history of a century and a half ago with the use of available capacities in the new format is repeated.
Source: https://habr.com/ru/post/400571/
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