Exclusive ITW With Matthew Baker: Western Union, Google Pay, and Digital Transfers (The Monito Briefing Issue #7)

Hello! As Google Pay wades into the world of cross-border payments by integrating Western Union and Wise into its P2P platform, we speak to Matthew Baker, Western Union's VP and Head of Digital for the Americas, about these developments and what they could mean for the company's digital transformation.

Then, we look at what Google Pay's integration of WU and Wise could mean for competition (and collaboration) in the cross-border payments space more broadly, particularly concerning technology giants and outside companies.

Read the full interview here.

Industry Highlights

Besides the significant piece of news we'll be exploring in this issue, here’s what else has been happening over the past two weeks:

• The Diem Association, the Facebook-backed blockchain transfer network, has scaled back its global ambitions to only the US, where it aims to offer a US dollar-backed stablecoin in place of a more extensive cross-border payments network;
• UK banking giant HSBC is set to launch 'Global Wallet', a new multi-currency digital wallet aimed at cross-border payments for businesses in the US, UK, and Singapore;
• Azimo, which recently arrived in Canada, sees the shift toward digital transfers as a "one-way street" that "will be permanent," according to COO Dora Ziambra;
• Challenger bank Revolut announced it will offer currency forward contracts to businesses, allowing fixed exchange rates for a set amount at a future date to help minimise exchange rate risk.

Google Pay: What We Know So Far

On 11 May, Google announced that its very own mobile peer-to-peer payments network, Google Pay, had been successfully integrated with Western Union and Wise, thereby allowing Google Pay users to send cross-border payments and exchange currency for the very first time.

On the same day, both Western Union and Wise came out with their own announcements, offering a closer look at what this could mean for the respective companies and for Google Pay users looking to send money overseas.

Here's what we know so far:

• USD-to-INR and USD-to-SGD payments are now available through the Google Pay network exclusively to users in the US through Western Union and Wise APIs.
• The offering is set to roll out for transfers from the US to 200 countries and territories on Western Union's network and 80 on Wise's by the end of 2021.
• Google Pay is available as a pay-in option (via a linked debit or credit card).
• Users can choose between Western Union and Wise, both of which offer their full pay-out functionalities. For Wise, this includes only bank deposits, while for WU, this includes cash pickup transfers in addition.

WU, Google Pay, and the Future of Digital Transfers

Western Union appears to be firing on all cylinders to try to bolster its digital business segment. Not only has the world's oldest (and largest) money transfer company been persistently expanding its digital offerings through new mobile and web functionalities, products, and partnerships — but it also has the figures to show for it.

In 2021, WU's digital revenues are set to surpass US$1 billion for the first time, with digital earnings becoming more and more important as a percentage of all customer-to-customer business. In Q1 2020, for example, Western Union's digital revenue made up nearly a quarter (23%) of all C2C revenues for the first time — a trend that's showing no sign of abating on either a quarterly or annual basis.

To unpack these trends and explore how they fit in with the new Google Pay integration, Monito’s CEO François Briod spoke to Matthew Baker, Western Union's Vice President and Head of Digital for the Americas. Among the main topics (and learnings) discussed included the following:

• Digital transformation: Western Union sees its digital business segment merely as an extension of the retail offering that the company has traditionally had for its customer base;
• Customer acquisition: The COVID-19 pandemic impacted Western Union's digital customer acquisition numbers profoundly, leading to the state today where around one in ten new digital customers are retail customers moving over to digital, and the remaining nine are brand-new;
• Google Pay and WU: Western Union's partnership with Google Pay is geared toward being a new customer acquisition channel, but also to provide convenience to existing WU customers using Google Pay;
• Contrast with Wise: Google Pay's side-by-side integration of Western Union and Wise provides an "interesting comparison," says Baker, which will help WU to highlight its complete and holistic portfolio offering;
• Competition from FAANG players: New entrants to the cross-border money transfer industry would face steep regulatory challenges and are therefore more likely to pursue the partnership route with existing players than go it alone, says Baker.

Read the full interview here.

What To Watch

Looking at digital cross-border payments from both a consumer and a corporate earnings perspective, it should come as no surprise that Wise and Western Union were ultimately the two IMTOs that landed at the top of Google Pay's integration. Not only do they together encompass a large and varied field of consumer demand, but combined, they also make up a sizeable slice of digital revenues among IMTOs:

Looking ahead, as new companies of all kinds potentially try to enter into the cross-border payments industry in the years to come, what remains to be seen is whether they opt for a partnership-oriented approach to dodge regulatory scrutiny, as Google did, or whether they try to build their own transfer infrastructure from scratch.

It's in this light that we're keeping our eyes on the following companies (among others), which already have a major global reach among users and significant capital to potentially enter cross-border payments in one form or another:

• Apple, which already offers its users an in-store credit card and mobile wallet, may leverage its global reach to step into the market.
• Amazon, which offers direct bank-to-bank domestic transfers via UPI in India, may extend its presence to underserved markets across borders.
• Facebook, which, despite its recent Diem pivot, could potentially double down on cross-border payments again at a future stage.

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