INTERVIEW: US Western Union Eyes Clear Split;Asia Growth
HONG KONG (Dow Jones)--U.S.-based remittance company Western Union is working on setting up support and technology systems and its own board of directors prior to being spun off by its parent First Data Corp. (FDC) before the third quarter.
"We're working on a clean separation from First Data," said Ian Marsh, managing director for Asia Pacific at Western Union, in an interview with Dow Jones Newswires. "There will be some costs associated with this, but at the same time, we won't have to pay for these services.
"Part of the intention of the spin-off is to allow Western Union to focus on the consumer rather than the businesses that First Data focuses on, and it would also give First Data greater access to capital," said Marsh.
On Jan. 26, First Data Corp. disclosed that it would spin off its lucrative Western Union money-transfer business, with every First Data shareholder getting a share of Western Union. The money-transfer business, which mainly relies on remittances from migrants, would thus be 100%-listed on the New York Stock Exchange. First Data bought Western Union in 1995.
The listing plans come as Western Union eyes massive growth in the Asia-Pacific region.
"The migrant worker is the world's last untapped consumer segment, because they are conservative savers, and yet move around and don't get respect from banks," said Marsh. "That's the market we look at, and the runway for growth in Asia is huge."
According to the World Bank, officially recorded remittances worldwide exceeded US$232 billion in 2005. Of this, developing countries received US$167 billion, more than twice the level of development aid from all sources. Asia, Marsh said, had about US$75 billion last year.
"Globally, Western Union has about 15% of the world's money flows in remittances," said Marsh. "My goal is to get that (same percentage) in Asia."
He declined to give details on the company's percentage of money transfers in Asia.
Remittances are private transactions from household to household, and are thus different from foreign direct investment, aid, or debt. At the moment, according to the World Bank, there are more than 185 million migrants worldwide, with the bank forecasting 283 million by 2050.
"Of those migrants, the World Bank estimates that about 66 million are sending money in and out of Asia - they process about US$50 billion in transfers outside the region," said Marsh. "I'd be happy to get a bigger portion of those flows."
Marsh said that the largest flows of remittances processed by Western Union globally are from the U.S. to Mexico, trailed by flows to the Philippines from the U.S.
Western Union, set up in 1851 and the creator of the first telegrams, generated revenue of US$4.0 billion last year, and operating profit of US$1.3 billion.
To handle the money transfers, the company has 253,000 locations in more than 200 countries.