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Executive interview: Expanding banking through APIs

Western Union’s head of digital ventures, Khalid Fellahi, discusses how the money transfer service is embracing digitisation

Western Union is in the business of moving money for people. It runs a cash network across 500,000 locations around the world.

Khalid Fellahi, general manager of Western Union Digital Ventures, says the business is aimed at migrants and global citizens, helping them to move money across country borders.

It operates a network of high-street outlets for currency transactions and, according to Fellahi, has gained brand awareness around the world.

“Traditionally, the customer was a migrant who moved abroad and would send money back home,” he says.

This is Western Union’s cash-to-cash business. People go to a Western Union outlet either to receive funds in local currency or to send cash abroad, enabling the recipient, such as a relative, to collect the money in their local currency.

Fellahi says Western Union uses retail-oriented technology to collect and disperse funds and make money settlements across borders and currencies.

His ambition is to enable customers to do business with Western Union across any channel.

For example, more affluent customers, along with the need to move money across borders, also wanted to move money into a foreign bank account, he says. Typically, such customers are more tech savvy and want to interact with Western Union via their smartphones and laptops.

Messaging services represent another customer touchpoint, says Fellahi, with many Western Union customers using messaging platforms such as Viber.

“We built a pilot with Viber,” he says. “When a customer sends a message, our services are built in, enabling them to send money via the messaging service. It is about being everywhere in the cash world.”

Emerging technologies

Fellahi joined Western Union 14 years ago to run its Africa business. A few years ago, he started to see new technologies appearing in African banking, such as mobile payments. This was among the stimuli for Western Union’s digitisation strategy.

“We already had our digital assets, such as websites, which were available in the US and Europe,” he says. “But we probably needed to accelerate the business.”

The websites evolved from informational to transactional sites in the mid-2000s, he adds. “At some point, it was clear the digital world was accelerating and we wanted to make sure we were going after the opportunity.”

Fellahi set up Western Union’s digital division in San Francisco in 2010. It is now available in 38 countries.

The company has engineered an architecture to cope with its digital business. One of the systems is a digital wallet based on Sybase 365. Western Union also runs Hadoop clusters to provide the powerhouse for customer analytics.

For Fellahi, the magic of paying money to someone elsewhere in the world relies on deep customer intelligence, along with systems to run currency exchanges and comply with anti-money-laundering regulations.

These core functions are back-office assets that Western Union uses to run its business, he says.

No need for Bitcoin

Asked whether Western Union is looking at Bitcoin, Fellahi says that although it could be used to simplify settlements, “We already have a very strong settlement engine, so there is no immediate need to support Bitcoin.”

In fact, Fellahi argues that blockchain, on which Bitcoin is based, does not offer enough to manage a business such as Western Union. “Our business is about managing the last mile, which requires access points and the ability to move money to all of these locations,” he says. “You also need to build trust.”

Fellahi says the technology is an enabler, and at present does not really help to move the business forward.

Western Union’s services are now packaged as a set of application programming interfaces (APIs) called Wu-Connect. “Beyond our direct products, we now have an infrastructure that can be exposed to others,” says Fellahi.

Money transfer as a service

For instance, some banks are embedding the Western Union service into their own mobile banking service, he says.  In effect, Western Union is offering partner banks money transfer as a service.

These banks can leverage different components of the Western Union service through Wu-Connect, says Fellahi. “Some banks want us to support their transactions end to end, while others will use single APIs within Wu-Connect.”

In effect, Western Union has built an infrastructure to make the components available to third parties, which can use some of its APIs. This gives the company a way to expand its network.

“We are the licensed banking entity – so for organisations that are not banks, we can manage the end-to-end transaction,” says Fellahi.

A bank generally has hard data about its customers, but further information, or signals, can be used to build on this to secure a transaction.

Wu-Connect offers a number of services for risk evaluation, such as risk scoring. “For us, data science is critical to manage our digital business,” says Fellahi. “Naturally, we started with risk management, but in the process of making risk evaluations, we rely on multiple datapoints that we obtain from third parties.

“We have a team of data scientists who have built powerful models to make our components robust and more than 25 sources of information to evaluate a customer’s risk. Data comes from a third party or a messaging platform, then provides additional informal to enhance the risk model.”

Read more about Western Union

  • As director of information security at Western Union, in charge of emerging technology and cloud security, David Levin has a deep appreciation of the risks of cloud computing.
  • Building and running enterprise Hadoop applications takes more than data crunching. Western Union has had to integrate large amounts of unstructured web information into the corporate workflow.

Western Union is also expanding its points of contacts with customers by extending the reach of its network. This is not being done by opening more Western Union outlets, but by pushing the fulfilment of money transfer transactions out to cash machines and retail partners.

Western Union runs tens of thousands of cash machines around the world for customers who have a pre-paid bank account, says Fellahi. It also runs kiosks in stores to enable foreign currency transactions in-store.

Mobile experience

Among the company’s major initiatives is the digitisation of its network, combining the mobile experience with the retail experience. “We want the primary engagement with our customers to start with mobile devices,” he says.

“Mobile devices can be used to find a Western Union location, trace the progress of a bank transfer, check currency prices or initiate a money transfer transaction.”

The aim is to extend Western Union’s network into locations such as supermarkets and other retail outlets to improve the customer experience. Once a transaction has been set up, the app will tell the customer where to collect their money, says Fellahi.

At the supermarket or shop operating as a Western Union outlet, the customer’s identity is verified and the transaction is fulfilled. This programme is bring piloted in the UK.

Read more on CW500 and IT leadership skills

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