August 16, 2019
Digital Finance

Western Union’s CEO: Banking fees are here to stay

Western Union

It happened at Davos

The world’s financial institutions want us to think they know how the future will be, especially when it comes to money and banking. But even they don’t agree on a lot of critical points.

You could have seen that scenario develop if you had been in Davos, Switzerland, for the infamous World Economic Forum. That’s where the world’s big boys get together once a year to talk about the present and the future.

One of the most exciting discussions lasted about an hour, and it was about the future of banking. There you could see how divergent opinions are the rule within the traditional financial system, more than the exception. In this article, we give you some of the highlights.

Meet the players

That Thursday morning conversation included Stephanie Meta (Fast Company’s editor-in-chief), Ann Cairns (Mastercard’s vice chairman), Hikmet Ersek (Western Union’s CEO and president) and Laurent Le Moal (PayU’s CEO). It’s veritable who’s who of the industry so you’d expect for them to know very well what they’re talking about, right?

The first subject was trust and security “You need to earn the trust of the consumer,” said Mr. Le Moal. And to do that, he continued, he explained that financial firms must complete a variety of tasks “It’s about promises getting delivered to the consumer,” Le Moal added.

“Money needs to arrive now—it needs to [have] almost zero fees,” he said. “If you deliver these promises every day, you win the trust of the consumer.”

His posture was apparent: if the companies in questions are to stay relevant, they’ll need to find ways to deliver cheaper, faster, safest services to the customers. But his point of view wasn’t exactly popular.

Fees are here to stay

Mr. Ersek, from Western Union, for instance, was apparently in disagreement as he grimaced at the “no-fees” idea, and then he talked. He was asked explicitly if removing fees could be the way to go for financial institutions and he was short and clear: “It’s not.”

“We’re all here to make money,” he continued. “There’s nothing wrong with making money off of consumers.” In Mr. Erseks’ mind customer are not looking for cheaper or nearly free services but good and reliable services so that every transaction gives them peace of mind. “The customer in Uganda trusts us to go pick up the money,” he added.

It’s all about the business model, according to Ersek. As things stand, the fees provide the income that keeps the companies afloat so it’s unthinkable to let those fees go low enough that they could threaten the company’s existence.

“These things are changing over time,” Ersek granted. “But at the end of the day, somebody has to pay for the service.”

It was an intriguing conversation. On the one hand, it’s understandable that Western Union or Mastercard or any of the other players are in business to make money.

On the other hand, if lower fees open up markets that are currently untapped for the very same service, wouldn’t that make your trade more profitable? In the end, that’s precisely why these companies are partnering up with Ripple, IBM, and Cardano.

[Image courtesy of]

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