Western Union’s Telegram to Silicon Valley: We’re Ready to Compete

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making sure we are designing the next generation of products that we bring to market.”

Much of the energy driving WU Digital will come from Fellahi himself. Born in Morocco and educated in France, he joined Western Union a decade ago and made his name running the company’s Africa operations. Mobile devices were sweeping the continent during these years, and when wireless operators such as Vodafone began giving mobile subscribers access to stored-value accounts several years ago, Fellahi pushed to get Western Union involved. Today, he says, WU partners with eight mobile operators in Africa, allowing subscribers in 14 countries to move money across borders into their stored-value accounts.

In 2010 Fellahi got a chance to apply what he’d learned in Africa as the head of WU’s Mobile Transaction Services group. Then in 2011, CEO Hikmet Ersek named him to lead the company’s new digital business. Fellahi promptly moved to San Francisco—where the company had no previous presence—and started laying the groundwork for the China Basin office.

Fellahi and I talked about everything from Western Union’s innovation strategy to the company’s business model in an era when it might have to look beyond money-transfer fees for revenue. Below is an edited transcript. (By the way, Western Union stopped handling telegrams in 2006, so apologies for the anachronistic headline—I couldn’t resist.)

Xconomy: What are Western Union’s big reasons for starting a new digital division?

Khalid Fellahi: We have this great asset of an extraordinary network around the globe, and we continue to build the fundamentals of our cash-to-cash business [where customers put down cash at a Western Union location to initiate an international transfer that terminates in cash at the other end]. The question was how do we accelerate our digital business, taking into account the assets we have? We are successful and will be successful only because of the combination of assets that we have. Even if digital is a small portion of our business today, we have the largest footprint of any money transfer company in the world. So how can we revamp our consumer experience and start investing in new technologies and new talent, products, and services that put us on a growth trajectory?

X: Why put WU Digital in San Francisco?

FK: After I took over the digital business in January 2011, the first six months were about rethinking all of our strategy, and we spent a couple of months with a task force right here in San Francisco to figure out the new trajectory of growth. Interestingly, we had nothing in San Francisco, not even an office. I took a bunch of apartments on Third Street and said, you know, we have to be in a place where we can think differently and go after talent, and that is easier to source here than anywhere else in the world. If you want to something in the digital space, you can’t make a mistake if you do it in San Francisco.

By the fourth quarter of 2011 we had a plan and an agreement, and by January of 2012 we had this office. It was just a shell, but I started hiring people right away, and we camped out here with about five or six people, the advance party, for four months. We started hiring, and while all of this was being remodeled we kept hiring and we haven’t stopped.

X: Most of Western Union’s business involves money transfers across international borders. Is San Francisco a good place to be based if you’re trying to figure out how to build a better mobile payment system for someone in Africa or Asia?

FK: I always go back to the basics. It’s about understanding the customer. For example, I talk to taxi drivers all the time. They’re usually from a different country. If I have a 20-minute drive, I talk to them, and I say, I see you have a Blackberry or an iPhone. Did you know that we have an app that will allow you to send money home while you are waiting at the airport for your next customer and it will take you five minutes the first time and after that … Next Page »

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Wade Roush is the producer and host of the podcast Soonish and a contributing editor at Xconomy. Follow @soonishpodcast

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