Feeding off the growing trend for economic migration, the global market for money transfers is one part of the financial service industry that goes from strength to strength. The most recent figures show that the global remittance market is worth around $269 billion, the lion's share of which (17.4 percent) is claimed by one company; Western Union, which now has three times more locations than the total number of McDonalds, Burger King, Wal-Mart, K-mart, Sears and Starbucks outlets added together.
Russia and the other CIS countries are becoming an increasingly important market for the remittance giant; strong economic growth has lead Russia to become the second most popular destination for migrants in the world (after the U.S.). The number of Western Union partner locations in the country has reflected this growth, doubling in number over the course of last year from 5,000 to 10,000.
But the company's expansion into the CIS has not been an easy ride; The Moscow News talks to Jonathan Knaus, Regional Vice-president Russia and CIS, about competition, corruption and why there are now 1,000 cash machines in Uzbekistan but no cash to put in them.
MN: How concerned are you about competition from Russian rivals such as UNIStream and Promsvyazbank which charge a fraction of the price Western Union charges for money transfers?
Knaus: It's a very competitive market and there are some very strong local competitors in Russia. But the market is very dynamic and it is growing; there is room for lots of players. Also there are indications that a significant portion of remittances are currently sent home through informal channels; through friends, bus drivers etc. so there is certainly opportunity to bring those within somebody's system.
One of the primary reasons for using our service is our reliability. And it takes money to maintain over 335,000 locations with up-to-date software, operator training and branding. We are investing a significant amount of money around the world both in technology and in compliance. The system that we have is a unique system because it is global; you can walk into any of our locations in over 200 countries and process a transaction within a matter of minutes.
MN: What is your response to claims that the easy flow of money you provide supports illegal activity and corruption?
Knaus: Corruption is talked about a lot in the press; we are an American company so we have strict regulations regarding our practices wherever we work around the world. What we cannot control is corruption in the larger economy; we don't have any control over that whatsoever. But we do keep track of people's behavior so if we do see large number of high value transactions going through our systems then that will cause us to take a closer look at these individuals and the types of transactions that they are making.
MN: There have been media reports that in some Central Asian countries, customers have spent weeks waiting in line to collect money that has been sent to them using your service. What is causing these delays and how are you dealing with them?
Knaus: It is difficult to control what happens in some of the bank locations. There have been reports in Uzbekistan that bank employees were allowing customers to jump the queue if a facilitating payment was made.
What we are doing in Uzbekistan is that our country manager is working very closely with the banks to make sure that there is sufficient cash available in all the locations so this shouldn't be an issue.
At present the government and the central bank of Uzbekistan are controlling inflation and controlling the economy very closely; they have strict controls on the amount of cash that's in the market place. We have been talking to banks about offering a service that would make it more convenient for our customers to retrieve cash, for example by using ATM machines. They said "forget about it; we have close to 1,000 ATM machines but they have no cash in them because the central bank doesn't provide sufficient cash to stock the machines."
It not for us to tell the central bank what they should do but we have had a number of meetings where we explained the benefits of our service. I do think that the central bank needs to realize that clamping down on cash is not necessarily the easiest way to manage inflation; they can find better mechanisms to do that.
MN: Western Union has been behind a number of important inventions in history such as phone cards, commercial satellites and singing telegrams. What groundbreaking developments can we expect to see next?
Knaus: Just last year we announced an agreement with the GSMA and a test pilot program in India to transfer money by texting. In India there are 700 million people living on less than $2 a day but the penetration of mobile phones is phenomenal; some mobile phone companies are bring on more than 3 million new subscribers a month. Over 190 million Indians now use mobile phones.
We can provide these people with a service so that they can transfer small amounts of money very quickly with a mobile phone. We believe that the mobile transfer business will change the dynamics of the world as far as having to transfer cash around.
By Rebeccah Billing
