I Heart Western Union
Posted by Matt Zeitlin on November 24, 2007
Reading the New York Times piece on Western Union made me feel better about WU than any other company in recent memory. How can you not love a company who’s entire purpose is to encourage immigration and the transfer of money back to home countries. The anecdotes the article gives are great - Western Union reps in and immigrant detention center, sponsoring Filipino clubs in Saudi Arabia, trying to oust Tom Tancredo - but the underlying message is an even more heartening one.
This is a company that exemplifies how beneficial immigration is to the third world — more so than just about any change in trade rules or foreign aid. And the benefits are passed on largely through money transfers by Western Union. And what’s even more striking is how Western Union charges the most for their services — not only are their rates and fees higher than banks, but also are higher than any other money transfer services. And yet they still have the largest market share.
It would be easy for immigrant activists and assorted do-gooders to complain about Western Union’s fees and large profits — and they did, and Western Union had to pay out a multi-million dollar settlement. But Western Union decided to become the friend of the migrant, charge the same fees and are overwhelmingly loved by their clientèle. Just like credit snobbery gets in the way of the most innovative anti-poverty program - microfinance - so too could money lending snobbery slow down the most effective wealth transfer mechanism in the world. Fortunately, those who actually use Western Union wouldn’t stand for it.
“You could say they were ripping people off, or you could also say they’re providing a service that poor people desperately needed and were willing to pay for,” Mr. Terry said. “Any consumer company in the world would like to have the customer loyalty they have. They’re doing something right.”
It’s now accepted that the best way to get out of poverty is some involvement in the market, whether by labor or investment. The problem for financial institutions is that they are working on tiny margins — either they’re loaning small amounts of money with low expected returns or transferring small amounts of money. Thus, they need to charge high interest rates for loans and high fees for money transfers. Quite simply, it’s better than the alternative, which is financial institutions ignoring the global poor.
November 27, 2007 at 8:48 am
At least part of Western Union’s success, despite its high rates, is due the monopoly it has with some of our nation’s finest prisons. I have a lady friend with an interesting personality and a drinking problem living in Florida who drove through one too many red lights with a buzz on and found herself a guest of Broward County whereupon she was offered almost as many opportunities to experiment with lesbianism as she was to find Christ. I sent her a few bucks every now and then for the commissary so she could have her smokes and an occasionally candy bar to carve into the shape of a gun and had to do it by Western Union which charged me, if memory serves, the outlandish price of nineteen and change for each transaction. That figure may be a little high, but allow me to assure you that it had to have been at least somewhat impressive as I do remember it hurting.
Please don’t mention this connection to Lou Dobbs.