‘A new customer segment’: Inside Western Union’s refugee assistance program

Remittance giant Western Union is recognizing that refugee communities can be emerging economies in their own right.

The Kakuma refugee camp in Kenya has 164,571 registered refugees and asylum-seekers, according to the UN Refugee Agency, and more than 500 merchants: produce markets, coffee and tea shops, bars; hardware and electronics shops, clothing stores, bike shops. Most refugee camps operate as largely cash-based economies — an expensive and inconvenient reality.

Now, Western Union and Mastercard are working on creating a digital infrastructure model for refugee camps, with Kenya as their test bed, focusing on mobile money, digital vouchers and cards that remove the intermediaries and losses associated with in-kind donations, brings funds directly to beneficiaries and gives them some control over their financial health.

“Ninety plus percent of refugees will never be granted asylum,” said Maureen Sigliano, head of customer relationship management at Western Union. “A lot of these countries where the bulk of the world refugees are” — Jordan, Lebanon, Turkey — “are poor; hosting such large volumes of refugees puts a burden on those countries. If they have a little cash in their hand, they’re no longer a burden, they become a new customer segment.”

In most of the developed world, digital transactions generate data on customers that companies can use to evaluate their credit, create new services and bring new businesses and customers into the economy.

The idea is still in an exploratory phase, but the plan is to use Mastercard’s digital voucher program to provide chip cards to refugees and host community members. The cards would be loaded with points they can spend on everyday purchases and are designed to work on or offline so participating agencies, like the International Rescue Committee, for example, can monitor different programs.

They also want to incorporate more widespread use of Kenya’s advanced mobile payments — the shining example of how mobile infrastructure can bring underserved people onto the formal financial grid — inside the camps. M-Pesa, the mobile money transfer service launched in 2007 by telecoms giants Vodafone for Safaricom and Vodacom, is the largest mobile payments network in the world. It’s used by 90 percent of the country and Western Union already offers the option to send remittances directly into an M-Pesa wallet.

Other countries with large refugee populations don’t have the physical, financial or technological infrastructure to pursue a digital model, but assuming in a few years they could, Western Union is betting they’ll be able to apply what they learn in the Kenyan camps to others.

The problem with cash 
Refugees manage money in a number of different of ways, according to Gregory Matthews, deputy director of economic programs for cash initiatives at the International Rescue Committee. Most rely on receiving aid in cash, some use prepaid debit cards — but it can be hard to find an ATM; and some use money transfer agents like Western Union, whose fees can be hefty depending on the transaction.

“High fees are definitely a problem from an operations and efficiency perspective, but they’re also a reality,” Matthews said. “In places where we work, nothing else is available — that’s why they have high fees.” It’s possible to shift those fees away from the person receiving the funds, he added, but the IRC itself still processes a lot of bulk payments and has to swallow those fees.

How refugees handle money depends in large part on the local banking infrastructure. With its high mobile penetration, Kenya becomes the perfect test bed. And as more countries show interest in that kind of development, “working with refugees is increasingly an onramp to getting people to use mobile wallets,” said Matthews.

“Nothing is all digital or all cash, it’s a mix,” Sigliano said. “The word is evolving such that it’ll increasingly become digital, but not as fast as we’d like, so we have to make sure all options are available.”

From default to design
Western Union is 166 years old and operates in more than 200 countries; it was serving refugees “before people were talking about refugees,” Sigliano said. But in September 2015 a photo of a drowned Syrian boy sent tremors around the world. She identifies this as the day Western Union changed.

“We saw that photograph and realized we actually need to be more focused on this reality; it can’t just be by default, it has to be by design,” she said. “How is it possible that a company like Western Union who serves the immigrants of the world wasn’t taking a strong position on refugees when we are uniquely positioned to do so? How can we ever expect customer loyalty if we’re not loyal to them at a time like this?”

That’s when the company decided to work harder on financial empowerment, instead of just financial access. Of the billion of dollars being moved each year between government agencies and NGOs to refugees, some 90 percent is for in kind aid: food, clothes, books, tents. Just five to 10 percent is delivered in cash. And with procurement, transportation and distribution costs associated with it, it’s so expensive it’s a wonder no one has successfully tried to disrupt the system.

“On average the cost of delivering in kind aid is 50 percent,” Sigliano said. “You put a million dollars in and get $500,000 on the other end.”

It also creates a cycle of dependency. Refugees fall in line in to receive cash in an envelope and so far the global perception of them is that they’re “poor, dependent, hopeless people,” she said.

“What they need most is financial empowerment, dignity and opportunity. So when a refugee gets even a tiny bit of money and can decide to spend, save or invest it, it gives them back dignity, choice and allows them to take a little control of their lives.”

How Western Union is digitizing a 166-year-old business

Western Union

As young companies like TransferWise and WorldRemit move into the remittances arena, Western Union is working to maintain its dominant position.

As tech companies, these younger companies are often able to innovate faster because they aren’t subject to the intense regulatory scrutiny that slows down large institutions like Western Union — it’s one reason legacy and startup firms have begun various partnerships with each other. Western Union, for example, is running a pilot for cross-border settlements with Ripple and has partnerships with messaging platforms Viber and WeChat. (Incidentally, Ant Financial has bid $1.2 billion to acquire Western Union competitor MoneyGram.)

These partnerships should bring more value to customers, but Western Union also has compliance officers to please. So its also working on technology solutions internally to help strengthen security and reduce fraud, which pair data with biometric capabilities, a global identity system and “polymorphic” technologies that try to fake out automated attacks.

“We’ve built our foundation on big data technology,” said David Thompson, Western Union’s chief information officer. “We do a real time risk assessment of every transaction in real time… this allows us to take a lot of data elements where we make a decision on the transaction for risk.”

Western Union has built a global presence based on the ability to move money to and from almost anywhere in the physical world, but like most financial firms, how it handles customer data will have a big effect on its place in the digital world. There’s an overflow of customer information floating around the Internet and every trace of it is vulnerable to online attackers with the motivation to steal people’s identity and use it to commit financial fraud. It’s one reason digital identity has become such a hot topic in the financial world, where fraud is becoming more sophisticated with the financial systems themselves.

“You might have many different personas but from a compliance perspective we have to view you as ‘who you truly are,’” Thompson said. “The compliance systems need to know you’re one, individual human.”

Western Union processes 30 transactions per second, to which it must apply hundreds of compliance and risk rules, using a concept it calls Galactic ID. At different points in time, users can register at different parts of the site as different personas — like students or small businesses. Western Union snaps that information together through the elements the customer provides, like her name, birthday, address, serial number from the computer or phone on which she registered.

“If you change any type of data element we snap you back to your Galactic ID, and if we see you trying to use data elements to try to adjust your ID, the compliance officers can very quickly see [it],” Thompson said.

He wouldn’t comment on how Western Union might use customer data for a future use case. Right now, it’s focused on security and compliance.

Whereas some companies try to minimize the amount of data that’s transacted, Western Union is still collecting data and using polymorphic technologies to block hackers out of its system. The idea is that an attacker could program a bot to try to enter an application or financial transaction — it would tell the bot how many fields there are to complete and have a trove of stolen credentials to try to throw at it, to try to gain access to your application, or fund a transaction.

“When you have a bot attacking app or infrastructure, our app is constantly morphing itself so the bots can’t pick out certain fields, because 10 seconds later those fields appear in a different way,” Thompson said.

Western Union is also tying that concept it with biometrics capability. Biometrics are becoming more widely used for authentication in the developed world — customers can unlock their phones, pay for purchases or log into apps by pressing their fingerprint against their phones. But in more developing countries — like India, the Philippines and others in which Western Union operates — biometrics are being tied to national identity schemes, where governments register citizens’ fingerprints to their IDs.

“They’re opening up the system to financial services so if you walk into one of our retail locations you can put your thumb on an identity plate, it will bring up your ID and you can validate a transaction,” Thompson explained. “We’re trying to buy into that very quickly. It helps us keep folks out of our network that are blocked by that local government, that can be identified as a criminal that shouldn’t be pricing, or are on a sanctions list.”

TCF Bank is reimagining the value chain with ZEO

In a world of changing customer tastes, incumbents have to keep their financial services menu fresh in order to ensure that their customers stay loyal and bring their friends (“You must try this budget management tool. It’s simply divine”). This is especially the case with retail banking, a crowded space that is populated not only with traditional banks but with a slew of alternative banking solutions such as online banks, digital wallets, and peer-to-peer payment apps, all of whom are clamoring for bank customers’ attention by making it oh so easy to bank and pay on the go.

TCF Bank, a national bank holding company based in Wayzata, MN, wanted to devise a centralized platform that would make it simple for customers to manage their money. It wasn’t a matter of being threatened by upstarts – TCF has approximately $21.3 billion in total assets and 376 branches in Illinois, Minnesota, Michigan, Colorado, Wisconsin, Arizona, South Dakota and Indiana which provide commercial and retail banking services.

Rather, TCF listened to its customers, who felt that they were sometimes forced to look elsewhere – say retailers – to access and transfer money quickly and efficiently. TCF’s answer to this problem was ZEO.

Meet ZEO

ZEO is a suite of financial services, which include cash checking, savings account, money transfer, bill payment, and money order. Like Greendot and Card.com which make the card the hero (and not the bank account), a salient feature of ZEO is in fact its prepaid debit card. However, you don’t need the prepaid card in order to take advantage of ZEO’s other services. If you sign up for ZEO, you can do everything else in the suite without needing to get the card.

ZEO is a convenient one-stop shop for customer money-management, but it’s also a bold statement. Two unique product attributes indicate that with ZEO, TCF is distancing itself from traditional vertical integration (owning the entire value chain) towards a model which facilitates multiple service providers collaborating on a single value chain.

ZEO doesn’t own the customer

In a bold move, TCF doesn’t require ZEO holders to bank with TCF. With ZEO’s debit card, for example, after a one-time $4 purchase fee, an additional $4 monthly fee, and at least $25 deposited onto the card, customers – from the unbanked to those who bank elsewhere – are good to go.

“A strong, stable retail bank is an important component of our business strategy,” says Geoff Thomas, Managing Director of Customer Segments and Alternative Channels for TCF. “ZEO helps us maximize our retail branch footprint and increase revenue from this real estate … Core deposit growth in the retail bank, like we’re receiving with ZEO, helps to fund lending growth.”

However, Thomas is convinced that ZEO’s critical transactional products will be a catalyst for cross-selling TCF’s other money management services.

ZEO is about collaboration

A partnership with money transfer leader Western Union means that ZEO users can transfer money and pay bills in the flashiest of flashes. At the outset, this partnership seems puzzling, since Western Union competes with banks to provide money transfer services.

However, Thomas concedes that as far as TCF is concerned, Western Union is still the most effective way to send money internationally. “Our customers are getting these services elsewhere,” Thomas admits. Thanks to this collaboration with Western Union, “ZEO ensures [that customers] can complete all of their transactions at a branch in a simple, quick way.”

For unbanked individuals, TCF’s inclusion of Western Union in the ZEO package has significant benefits. With ZEO, the unbanked can manage and access their money in the safety and security of a bank without needing a bank account, and have the option of consulting with banking experts to boot.

Yes, ZEO is very much about millennials

It should come as no surprise that ZEO targets millennials. After all, millennials are increasingly turning towards non-bank solutions to manage their money. To TCF’s credit, ZEO shows that the financial institution is adapting to millennial expectations.

“More than half of our total transaction accounts are opened by millennials,” says Thomas. “They grew up in the ‘gift card era’ and they are very comfortable using prepaid cards, in some cases, preferring them to traditional banking accounts.”

Though alternative banking services abound and general purpose reloadable cards are becoming mainstream, ZEO is proving itself to be a worthwhile investment for TCF. According to Thomas, the market has responded favorably towards ZEO. For existing customers, the service has certainly been a boon: “Many of our customers share that it now is easier with ZEO because they can conduct all of their banking transactions in one location with the expertise of a banker.”

Photo credit: markus spiske via VisualHunt.com / CC BY

4 fintech tools that still run on cash

fintech apps that use cash

Enough with the talk about moving to a cashless society. Sure, that works if you’re Sweden and some other wealthy Scandinavian countries, but for much of the world, the demand for cash seems to be growing, not shrinking. Actually, we’re in a bull market in ATMs. Millennials don’t seem to understand how credit cards work and many shun them altogether (in a recent study, 63% of this demographic doesn’t have a credit card).

Many people don’t qualify — or don’t want — traditional credit products. According to PayNearMe, a fintech firm that handles cash payments for its users, more than 28% of U.S. consumers prefer to use cash because they either don’t have a bank account or choose not to rely on automatic payments, checks and credit cards.

A more realistic evolution of how the move away from cash plays out probably doesn’t include bitcoin, either. So far, the cryptocurrency is relegated to hackers and drug pushers.

What does have legs are apps and services that bridge the digital and analog worlds of payments. These tools provide more digital alternatives for people who still prefer the ease of use and comfort in touching paper money and coin.


This app was designed for people who prefer to pay their bills in cash. PayNearMe users download an app and use it to scan their rent, utility and insurance bills. To pay, they bring their smart phones and cash into one of 17,000 retail locations around the U.S. like 7-11s and Family Dollar Stores. A cashier takes the cash, credits the app with the exchange, and the bills get paid.

The Glendale, California-based company has raised over $70 million and recently announced the acquisition of a personal finance management (PFM) app, Prism Money. With Prism, PayNearMe can handle more breadth of its users’ payment cycles.


For users who eschew banks, there’s some virtual banking technology tied to debit cards that looks and smells kind of like a bank, but doesn’t require an account. GreenDot sells debit cards that can be loaded with cash at local storefronts and those cards function just like bank-issued ones. Users can add, send, and manage their money tied to their cards.

GreenDot is publicly traded on the NYSE ($GDOT) and has a marketcap around $1 billion. The company did close to $700 million in revenue during 2015.


Ever travel overseas and come back with six pounds of British pounds? Yeah, me too. Turns out that’s a pretty common occurrence. TravelersBox is an ATM-like kiosk installed in various airports around the world that will take your spare foreign currency and move it onto PayPal or a Starbucks gift card, or give it to charity.

The company has raised $14.5 million in venture and seed money.

Western Union

WU has its own prepaid card called NetSpend and it functions similarly to GreenDot’s debit cards. Users can direct deposit their payroll and government benefits directly to their cards, as well as make money transfers off the card. Money transfers utilize Western Union’s transaction network in 200 countries. Users can use their cards to pay bills online and save for the future via access to a WU savings account.

Western Union provides its own branded cards but its branch locations are also available for people to load money on to other prepaid card brands.


High Five! The top 5 fintech stories we’re following today

5 trends we're tracking in finance

[alert type=yellow ]Every week at Tradestreaming, we’re tracking and analyzing the top trends impacting the finance industry. The following is a list of important things going on we think are worth paying attention to. For more in depth trendfollowing, subscribe to Tradestreaming’s newsletters .[/alert]

1. Competition in hot pursuit, Western Union continues to lead
Western Union may be 165 years old, but don’t make the mistake of thinking them old-fashioned. The cash transfer giant is staying competitive by

  • Maintaining its physical locations – this a big draw for the developing world, in which nearly 75% of all remittances transpire.
  • Embracing the digital shift in the remittance market by adopting do-it-yourself online transfers, developing mobile payments, and even enabling payments in bitcoin.


2. BofA targeted by top female banker in ‘bro’s club’ lawsuit
Equal pay for women has been getting a lot of coverage in the entertainment industry of late. Patricia Arquette’s rousing 2015 Oscar speech demanding equal pay and equal rights for women has allegedly already cost her acting jobs, but has also been linked to concrete change on the ground; specifically, with the passing of the California Fair Pay Act in January 2016.
Women are now bringing the equal pay fight to the finance industry. However, in lieu of a gala evening that affords actresses the chance to broadcast their message of equality to millions of viewers around the world, women in finance are turning to an equally effective, if less glamorous, awareness-raising tool: lawsuits.
Most recently, a senior female fixed-income banker at Bank of America Corp filed a lawsuit accusing the bank of underpaying women, and retaliating against her for complaining about illegal or unethical business practices by her colleagues.
In a complaint filed on Monday night, managing director Megan Messina said she is a victim of “egregious pay disparity” relative to male peers, and has been paid less than half the man who shares her title as co-head of global structured credit products. Should Messina win, this lawsuit could trigger similar lawsuits throughout the industry, forcing incumbents to rethink their payment models. Stay tuned.

3. Walmart Pay and the overcrowding of the mobile payment market
Walmart just launched its mobile payments platform, surprising not a few people in the industry. What are the benefits and dangers retailers can look forward to facing in a world in which every single retailer has its own mobile service?

Read more: RIP MCX, the retail industry consortium that was going to take on the credit card companies (Tom Noyes)

4. The impact of blockchain goes beyond financial services
In an article for HBR, futurist Don Tapscott and his son Alex Tapscott scout out the potential disruptive impact of blockchain on all industries as we know them:
“[Blockchain is] the first native digital medium for value, just as the internet was the first native digital medium for information. And this has big implications for business and the corporation.”
As blockchain is increasingly incorporated across industries, we’ll get a better idea of where blockchain is really a superhero, and where it’s merely Clark Kent.
For more on blockchain mania, read on about Thunder, an open source network that wants to make bitcoin a viable alternative to credit card networks like Visa.
5. How DailyWorth turned a newsletter into a roboadvisor for women

Competition in hot pursuit, Western Union continues to lead

165 year old Western Union stays ahead of competition

Dozens of startups have opened in the last several years touting faster and cheaper ways to send money abroad. These digital-native companies like U.K.-based Transferwise and WorldRemit, along with Paypal’s Xoom, say their goal is to disrupt the money transfer sector, long associated with high fees and waiting in lines at kiosks with a pile of cash.

But the industry’s grandfather, 165-year-old Western Union that started out sending telegrams, does not seem to be losing its foothold. Western Union’s share of the cross-border transfer market has hovered around 14% for the last five years, according to independent research and consulting firm Aite Group. And no startup has more than a 1% market share, according to Aite.

“It’s a lot harder to take them out than a lot of people think,” said Brett Horn, an analyst at Morningstar. covering the money transfer sector. “Western Union looks very outdated, but when you look below the surface, that’s not the reality of it.”

How a 165 year old financial services firm competes

This is partly because Western Union, unlike the upstarts, maintains a wide network of bricks-and-mortar locations that can send cash, which is still a staple in much of the developing world. The developing world accounts for $432 billion of the $582 billion global remittance market, according to the World Bank.

But it is also because Western Union has embraced the rapidly growing world of do-it-yourself online transfers, mobile payments, and even cryptocurrencies like Bitcoin, as it is well aware of the digital shift in the remittance market.

Only 7% of remittances in 2015 were digital, according to Aite Group.  This is because digital transfers, the bread and butter of startups, often require a credit card or bank account, something lacked by the 38% of the world’s residents who are considered unbanked, according to the World Bank. But the numbers of unbanked people continue to fall rapidly, with a recent report from the Global Forum on Remittances and Development estimating that cash-based remittances will only remain dominant for another five years.

Western Union is prepared for future cash trends

Western Union continues to prepare for this widening shift away from cash, offering online transfers to bank accounts in 33 countries, and the ability to send money to mobile phones in 13 developing countries, where consumers can use the funds in their mobile wallets to pay bills and buy goods without having a bank account. All of these efforts overlap with services offered by startups.

“Western Union is still a giant, but even giants like Western Union are changing their business model,” said Pedro De Vasconcelos, manager of the International Fund for Agricultural Development’s Financing Facility for Remittances, which aims to promote innovative and affordable ways for people to send remittances to poor, rural areas.

In another attempt to keep up with the rapidly changing financial world, in April Western Union invested an undisclosed sum in Digital Currency Group, an investment firm focusing on bitcoins and the technology underlying them, blockchain.

And last year it launched WU Connect, which allows money transfers through social media and messaging applications like Viber.

New technology just part of the formula

But because the fees are lower for the digital transactions that are likely to replace a growing number of in-person cash transfers, in order not to die a slow death, Western Union must maintain its market share rather than let it slip away to startups.

“For incumbents, like Western Union  there is an erosion of their margins and they are being forced to tighten up operations,” Talie Baker at Aite wrote in an email to Tradestreaming. “As prices continue to decline, incumbents will be challenged to migrate their existing customer base to digital forms of remittances as well as attract the millennial generation who may be attracted to some of the startups over Western Union.”

Analysts also pointed out that there are many lucrative niches and sub-sectors in the cross-border money transfer market, such as offering other financial services like savings accounts to unbanked customers, and that many startups are actually targeting these areas.

“There are many places for startups to go without bothering Western Union,” Horn said. “It’s not contradictory to say that Western Union is going to maintain its business and that there is also a lot of opportunity for upstarts.”

Photo credit: Eleaf via Visualhunt.com / CC BY

[podcast] Why a 164 year old payments giant partnered with the hottest social media tool on the planet

best presentations for marketplace lending

One of the themes we’re tracking here at Tradestreaming is the confluence of incumbent financial institutions with new technologies, platforms, and tools. When you look at some of the largest and oldest financial institutions, some are indeed embracing the future.

Western Union is one of those firms. You’re probably familiar with the fact that Western Union provides consumers and businesses with a variety of ways to send and receive money around the world. Through multiple brands , the company, which is 164 years old, has built a combined network of over 500,000 agent locations in 200 countries and territories and over 100,000 ATMs and kiosks, giving it the capability to send money to hundreds of millions of accounts. In 2014, The Western Union Company completed 255 million consumer-to-consumer transactions worldwide, moving $85 billion of principal between consumers, and 484 million business payments.

David Thompson, CIO of Western Union
David Thompson, CIO of Western Union

The scale is pretty staggering and what’s interesting is how the firm is embracing some of the same tools its customers are using. A recent study by McKinsey estimated that by 2020, 12% of global remittances will be initiated via social media and communications platforms. To this end, earlier in the fall, Western Union launched the WUConnect service, which opens Western Union’s internal transaction processing network to platforms that want to offer social and text payment capabilities to their own customers.

The company created application programming interfaces and a software developer’s kit to let social networks, like Facebook, access the service. And just a couple of weeks ago, the company announced that WeChat, the Chinese communications platform, is rolling out an integration that would enable its 650M active users to send money to one another over the WU Connect service.

David Thompson, Western Union’s Chief Information Officer, joins us today on the Tradestreaming Podcast to discuss how his firm views the convergence of social, technology, and finance and how he’s helped manage the internal processes to ensure Western Union stays competitive and relevant throughout the evolution of today’s technology.

Listen to the FULL episode

What you’ll hear in this week’s podcast:

  • The inherent socialness of payments and why it makes sense for apps/social platforms to offer peer to peer payments
  • WUConnect, Western Union’s API / SDK suite to integrate cross-border payments into social media networks
  • What’s driving the partnership with WeChat, China’s leading social media communications platform with 650M monthly users
  • How payments can drive additional stickiness to large social platforms
  • Strategy drill-down on Western Union’s global leadership in cross-border and digital payments
  • How Western Union’s competitiveness is driven by a large investment in regulatory compliance in 200 countries around the world
  • David’s view on the challenges in cross-border, cross-currency money transfer and what he and Western Union have done to solve for these
  • Why McKinsey believes that by 2020, 12% of global remittances will be initiated via social media and messaging platforms
  • What David has planned for new types of partnerships in 2016 as well as new functionality slated to be launched as part of WUConnect


This week’s episode of the Tradestreaming Podcast was sponsored by Collective2 — automated trading for humans.

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To learn more, go to www.collective2.com/tradestreaming and as a Tradestreaming listener, you will get $55 off the first strategy you publish to Collective2.



Photo credit: sandklef / Visual Hunt / CC BY-SA