Western Union's 150-Year-Old Recipe for Success: Remittances Now Constitute the Second Largest Flow of Capital to the Developing World. in Some African Countries, Remittances Form the Largest Segment of Foreign Exchange Income and Contribute Substantially to National GDPs. Anver Versi Reports on How Western Union Has Become the Global Leader in the Money Transfer Industry

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Remittances home from ethnic minority communities working in high income countries reached the quite staggering figure of $269bn in 2006. This flow of capital is second only to government aid and grants in terms of volume. The transfer of money, mainly from the Middle East, North America and Europe to Asia, Africa, the Caribbean and the former USSR member states, has become a vital economic component in the daily lives of millions of people.


"The value of this flow of capital is far, far higher than the nominal value of the money transferred," says Hikmet Ersek, executive vice-president and managing director of Western Union Financial Services. Ersek's territory covers Europe, the Middle East, Africa and South Asia. It is the largest segment of Western Union's global business. Ersek, son of a Turkish father and Austrian mother and who once played basketball professionally, controls over 150,000 locations in his territory.

I met Ersek in Delhi, India, while Western Union was celebrating the opening of its 300,000th location. "We have the largest number of agents in the world," he said "but there is room for more." He wants to hit the 500,000 mark. "My dream is for everybody everywhere in the developing world to be within easy reach of an agent."

Ersek's business campaign is part of Western Union's 150-year-old tradition of 'trying to reach the unreachable'. The organisation began life in the US in 1851 as a telegraph company--an episode in the history of the US that has been richly romanticised in a host of Western adventure films. The company guaranteed the delivery of telegrams by whatever means possible even if that meant gruelling rides over treacherous landscapes.

Today it guarantees the safe and quick delivery of money. You don't have to have bank accounts or fill out lengthy and confusing forms. As long as there are Western Union agents in the sending and receiving countries, you can send money safe in the knowledge that the person for whom it is intended will receive it.

Western Union agents include banks, post offices and standalone establishments. In Morocco, mobile units tour the rural countryside bringing very welcome remittances from workers in Europe to their families in remote villages.

Since migrant workers in high income countries form the bulk of Western Union's business; "local input is of paramount interest to us," says Ersek. Agents are often located in areas where migrants tend to live and work and staff are recruited from the local ethnic communities so that language does not become a barrier.

Over 60% of remittances go to support families in developing countries, pay for school fees, purchase food and clothing and, increasingly, towards the construction of homes.

This outreach to the communities coupled with the company's reputation for fast and reliable service has been the bedrock of Western Union's success. It has a 17% share of the global market, well ahead of its nearest rivals. The company's revenues for 2006 came to $4.47bn. There were 280m transactions, averaging 12 transactions per second.

Western Union decided to mark the opening of its 300,000th location in Delhi because India is the biggest remittance inbound country, with flows of over $20bn. A very large segment of this comes from the Middle East with Saudi Arabia alone remitting over $10bn. US and Canada are also leading outbound markets and the European Union is now the second biggest outbound market in the world.

In Africa, Western Union has over 10,000 locations in 49 countries. The global remittance market for Africa is estimated to be between $20-25bn per year with Morocco, Egypt and Nigeria the leading recipients. There are over 2,000 locations in Nigeria alone. Overall, the company has more than 175 agents on the continent. Most agents are banks and post offices or post-banks. Where these are not available, the company works with reputable commercial firms. …