Western Union money still making the world go round

Lying on the floor of a basketball court, having been sent tumbling by a younger player who schooled him on a dunk, Hikmet Ersek decided it was time for a career change.

A friend turned to the 6ft 5in semi-pro player and said: “I think it’s time to quit.”

And so began the Turkish-born student's trajectory to becoming president and chief executive of multibillion dollar company Western Union.

The then 26-year-old took a job with MasterCard, signing up merchants such as hotels and restaurants. He progressed to vice-president for sales and marketing, before leaving to work at GE Capital as vice-president for retail sales finance and then for consumer financing. In 1999, he joined Western Union, taking over the running of the company in September 2010.

“We had 75,000 locations globally when I started. We now have 510,000 locations. We’ve added 100,000 locations in India alone under my leadership in the company.”

He says Western Union was a bricks-and-mortar company when he joined, with customers sending or receiving funds through agents in grocery stores, post offices and the like. He decided to make a number of changes and modernise operations.

“Customer behaviour is changing. They want to use different methods of exchanging and receiving. You can send money now from your mobile phone to a location, or from an account to a pre-paid card. It used to just be from one location to another location.”

Since becoming chief executive, he has spearheaded the international expansion of the company, growing the retail money transfer business in new locations and adding electronic and mobile channels.

In 2011, the Western Union bought Travelex Global Business Payments and introduced a business-to-business electronic money transfer service for importers and exporters and SMEs.

Western Union now processes 28 financial transactions every second, each one moving $350 (€267) on average.

Western Union has had links with Ireland for over 100 years. Back in 1873, it was instrumental in Ireland’s early international development, linking the country with the rest of the world through the first transatlantic cable, which was laid at Valentia Island in Kerry.

But it wasn’t until 1990 the US company started offering its money transfer services in Ireland. Ireland’s large emigrant population provided a fertile market for the company as it embarked on an aggressive international expansion strategy. It joined forced with Killorglin-based Fexco to operate an Irish franchise of the business, later bringing An Post into the network.

In 2000, the US company acquired a 25 per cent stake in Fexco for around €63 million.

Ultimately, the network boasted 900 locations across the State, but that was before Ersek’s diversification from purely physical outlets. In 2009, Western Union bought Fexco’s money transfer business in return for its interest in the Irish company and almost $160 million in cash

However, the evolution of the US payments group hasn’t been all plain sailing. Like most companies, the global economic downturn and the euro zone crisis has had an effect on the company.

Downsize
"Our customers didn't have enough money to be sending money back home. They had lost their jobs. What do you do? I had to downsize. I had to change operations in different parts of the world. It was difficult downsizing when I wanted to grow the company.

“Last November, we did a $350 million investment in the company. Our stock went down 30 per cent in one day. It plummeted from $19 to $13. It hurt me. I knew the investment was good for the long-term shareholder value but not good in the short term. I had sleepless nights following it.”

The company began innovating and making changes to the services it provides – and the way it provides them.

And if any company knows about innovation, it’s Western Union. It completed the first transcontinental telegraph line across North America, introduced the first successful stock ticker, pioneered the first disposable prepaid phone card, introduced the first commercial satellite in the US and created the first customer charge card.

In fact, the company started life as a telegram business, only introducing the money transfer service two decades later.

“We noticed that, across Europe, banks close at 4pm. What does a customer do then? They need locations open later. We now have 10,000 non-bank locations all over Europe. They are all licensed.”

That Payments Services Directive (PSD) initiative is based in Ireland, where the company employs close to 100 people.

“If we hadn’t been focused on consumer needs, we wouldn’t have thought about their time problems, that they might not be able to get to the bank before 4pm.

“We put ourselves in the customers’ shoes.”

Dublin operation
Ersek sees the Dublin operation involvement in PSD as "an incremental part of our success".

“For years, we had 27 locations in Japan. People didn’t want to go to the locations though. We now have 30,000 ATMs there.”

Ersek was in Dublin recently to meet Taoiseach Enda Kenny in his role as holder of the European Union presidency to press for harmonisation of regulations and laws within Europe on payments.

“As CEO, you want a harmonised market,” he said.

Ersek believes his legacy will be developing a more consumer orientated company. He says what was mainly a processing company in the 1990s has successfully adapted by continuously putting the consumer first.

“Every good CEO understands customer needs. Excellent CEOs predict customer needs. I’m trying to be the latter. I’m an acting person rather than a reacting person.”

"The head of our African operations was excellent. He really knew the customer needs. So we transferred him to San Francisco to build the digital business. Everyone thought we were mad as he had no tech experience and we were putting him in San Fran, where everyone is a digital guru."

Consumer needs
While technology facilitates new types of relationships, Ersek is adamant staff stay focus

ed and centred on consumer needs. He believes cash will always be king despite the advances technology has brought about.

"Technology is not driving the company. Customer needs are. Some 99 per cent of payments in Africa are still cash. Cards will disappear. Cash won't disappear there."

“Cash is the cheapest form of paying bills. You have to pay fees on cards.”

With more than half a million retail outlets, many of which are based on agreements with local banks and other financial institutions, there is no doubt the Western Union business is hugely complex. While revenues will come down this year, the company last month projected cash flow will be around $900 million.

However, it is the simpler things that bring a smile to Ersek’s face, such as the ability to quickly transfer money to his Dad.

“My biggest obstacle is time. If I get a text from my father looking for money, I can transfer immediately using my iPad and he can pick it up within minutes and start spending it.”

“My father is 90 and lives in Istanbul. I send him money via Western Union several times a year. He supported me for years, so now I support him.”