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06 Nov

Western Union’s Digital Destiny


By Sharon Simonson

When Western Union, the 160-year-old money transfer company, decided it needed to take on the digital world in a much bigger way, the chief executive told the new division’s director, “Go anywhere you want, so long as it is San Francisco.”

So a bit more than a year ago, Khalid Fellahi, senior vice president and general manager of Western Union Digital Ventures, packed two suitcases and headed for the city.

While Western Union has deep American roots with original ties to the nation’s 1850s westward expansion, in the last three decades it has become a global financial player. Earlier this year, it opened its 510,000th agent office worldwide. Approximately 165 million people a year, overwhelmingly migrants, send money using its services. It now has 16,000 “corridors” and country peers globally (links from site A to site B) through which it can send and receive money.

With the rise in global migration and the diaspora of populations worldwide—so evident in the everyday life of the Bay Area—the Colorado company with $5.5 billion in annual revenues is ready to conquer the world.

“Our main business is to serve the diasporas and their loved ones in 200 countries and territories across the globe to facilitate remittances to the countries of origin,” Fellahi told the International Diaspora Engagement Alliance in Washington, D.C., last year. “These remittances represent at least 10 percent of the GDP in approximately 40 countries.” Western Union has partnered with the U.S. Agency for International Development and is a founding member of IdEA, which (among other goals) helps diaspora entrepreneurs to invest and build employment in, and trade with, their countries of origin.

Historically, it has been a cash-to-cash transfer business for people: Taking money from one person in one location and delivering it to another somewhere else accounted for 84 percent of its consolidated revenues last year. But the company sees tremendous opportunity in the estimated 140 million small businesses worldwide and the 28 million that do cross-border trade.

Western Union is a company of immigrants. Its 8,000 employees come from 75 countries worldwide. Chief Executive Hikmet Ersek, who before WU labored for General Electric Capital in Austria and Slovenia, is fluent in English, German and Turkish. Fellahi, 47, describes himself as a Moroccan and African Arab. He was educated in France and spent six years running Western Union’s Africa operations before coming to San Francisco.

While Northern California life differs materially from that existence, Fellahi’s head remains very much across the seas because the company’s electronic channels—online and mobile—mostly serve those in developing countries.

Still, day-to-day, the most obvious channel that Fellahi overlooks is that of Mission Creek immediately behind the company’s 26,000-square-foot China Basin office, separating it from the quickly rising Mission Bay neighborhood.

Western Union established its first Web site where a consumer could initiate a money transfer a decade ago. In 2011, the company recorded $100 million in fees from its online operation. “We started to think about it about a year and a half ago and said, ‘This business should be much bigger,’” Fellahi said.

The aim is to quintuple annual revenues from online and mobile money transfers by 2015. CEO Ersek told analysts in May that Digital Ventures was one of three new “fast growing, early-stage businesses that could potentially become as large a part as our existing businesses in the future,” according to

“We have to win the electronic channels as we have the retail channels,” Fellahi said. “In the next three to five years, they will become a very important part of our business.” The company has committed $35 million to investment in new digital products, technology and talent this year, including its dedicated San Francisco office.

On Jan. 9, when Fellahi moved into the China Basin space with a half-dozen others, the interior was not yet complete. Western Union doesn’t wait to start business until it has its offices finished out. He launched his first Western Union office in 2002: “My mandate was to go to Casa Blanca and Morocco. I started a Western Union office in my bedroom,” Fellahi said.

He began recruiting workers in San Francisco right away. The talent sweet spot is a mix of specialists in online payments, risk mitigation, mobile technologies and ecommerce, he said, areas where San Francisco has “history and culture.” The China Basin location connects ideally to Interstate 280, which brings a workforce mostly from outside the city in and gets travelers to the San Francisco International Airport in a half hour or less.

“You had better have a very good story when you bring talent into a space that is just rubble,” Fellahi said. “None of this nice stuff was here when we started recruiting our top people.”

But the story was good and resonant with the San Francisco ethos in ways beyond the technical. Workers’ efforts benefit people worldwide to educate themselves, live better and to gain medicines or services. And Americans collectively seem to love the notion of the sole visionary entrepreneur starting with a few dollars—in this case from his immigrant brother or cousin hundreds or thousands of miles away—and making it.

Western Union Digital Ventures expects to top out at 120 workers or so, which it should reach by the end of the year. Employees are told to arrive daily with their passports. READ THE ARTICLE ON THE REGISTRY

Photography by Chad Ziemendorf