Western Union Eyes China

Date: Thursday, September 23, 2004

China's miracle economic growth and the rapidly rising number of international travellers have contributed to the fierce competition, in China, between the world's money transfer giants.

But foreign firms are not creating the fiercest competition for Western Union, says one of the company's top executives.

That competition, he said, is from underground service providers.

"In my view, market competitors (in China) are the ones you do not have to think about. The real competitors (for us) are the informal channels - the underground channels," Ian Marsh, senior vice-president and managing director of Western Union Asia-Pacific, told China Business Weekly.

"We estimate probably US$11 billion worth of inbound remittances are coming into China, and that is something we know about ... And there may be another US$9-11 billion which we do not know about," he said in an exclusive interview.

Shying away from cutting prices to compete, Marsh said Western Union will focus on ensuring customers to feel the firm's money transfer service is reliable.

Western Union, in terms of reliability, will always outperform those underground services, he said. The company can wire money to anybody anywhere in the world, even if the recipient does not have a bank account.

"Providing customers with easy, secure services is the best way to fight the underground channels," Marsh said.

Apart from the illegal services, traditional telegraph services, over bank counters, also compete against Western Union.

Most people still prefer using the traditional services, which may require a longer delivery time, but cost less money.

Western Union targets both "banked" and "unbanked" customers, Marsh said.

Even though many people wire money via banks, Western Union can still do a better job, given its sprawling location network, with 200,000 authorized agent locations, along with its subsidiary, in the world, Marsh said.

That means people will have an easier access to Western Union's outlets.

Although many people tend to be price-sensitive, big bucks can still be found in the money transfer business.

Western Union and MoneyGram have aggressively been making inroads into China in recent years. They have detected the potential urge to transfer funds as China has rapidly integrated into the international community.

Both companies have been in China for about 10 years, and both have forged strong alliances.

MoneyGram teamed with the Bank of Communications after it secured links with the country's largest commercial bank, the Industrial and Commercial Bank of China, and CITIC Industrial Bank.

Western Union, meanwhile, signed strategic partnership with China Post and the Agricultural Bank of China to tie itself to the two institutions' sprawling networks.

MoneyGram last month opened its Chinese mainland subsidiary, in Shanghai, to enhance its strength in China.

By the end of last year, MoneyGram had 300 outlets in the Chinese mainland. Since then, the number has risen to 700.

MoneyGram said it will have 1,000 outlets in China by year's end.

Marsh did not provide specific figures, but said the number of Western Union's agent locations in China has increased by 90 per cent year-on-year through August.

Marsh said the company has more than 70 flagship locations across the country.

Both companies have initiated attractive price packages, and are working hard to raise awareness of their brands.

Western Union also invests in advertising to increase the brand awareness through the media.

Marsh said about 45 million Chinese live overseas, of which nearly 7 million are new immigrants. They provide tremendous business potential for money transfer firms.

Western Union's inbound businesses, which wire money into China, grew 160 per cent in the first half of the year.

The outbound businesses, meanwhile, increased more than 100 per cent.

Marsh said one of the business opportunities, which traditionally have been overlooked, is in the intra-Asia region.

"With so many Chinese people living in Southeast Asia, the potential should be huge," he added.

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