Western Union Company: Generations of transferring Emotions and cash.
Sweta Chaturvedi
Global Marketing Manager |Ex-Microsoft| Seoul National University- 2020
For ages, the history of transactions was largely disbursed employing a traveler UN agency would ride on horses or sail in ships to deliver a tiny low piece of knowledge. Humans were inventive and typically used columbiform birds that after all got tired overtime and UN agency apprehend if the pigeon gets angry and your billet-doux got delivered to the wrong person!!!! Well, each the strategies area unit inefficient and protracted however weren't extremely reasonable by all sections of society. the answer to the matter must return through innovation once in 1937 Samuel F.B. Morse fancied the telegraph. victimization Dots and Dashes (Morse Code) messages were transferred at intervals at multiple locations in the USA (Figure 1). Telegraph was the primary long-distance communication technology. the primary telegraphic message sent was “What hath God wrought!” sent by Morse to Vail on Commonwealth Day, 1844. US Government supported the technology and telegraphy systems became standard.
The emergence of Western Union:
The NY and Mississippi natural depression Printing telegraph Company, referred to as Western Union currently based by a man of affairs, Samuel L. Selden, Hiram Sibley, and Jeptha Wade in Rochester NY, claimed to attach coast to coast by their telegraph services. Before that Messages were transferred by one person from one company to a different, and rates around $20 for a message too pricey for those days huh even now!!! However, luck was on their side, once the warfare started the requirement of fast communication was essential. The sole fast communication gift at the time was Pony express that took ten days from St Joesph to Sacramento. To attach telegraphy lines across 2000 miles given the piece of land different corporations refused to require the project solely until, President Lincon told Hiram Siley Western Union’s president, "I suppose it's a wild theme. it'll be next to not possible to induce your poles and materials distributed on the plains, and as quick as you complete the road, the Indians can cut it down." In less than 4 months the project was completed and shortly after two days, US Government terminated services from Pony express and accepted Western Union to deliver inter-continent messages. Western Union started increasing and bought five hundred telegraph corporations across the nation (Figure 2).
Dominance and diversification:
By 1864 solely Western Union and also the American Telegraph Company remained of the “Six Nations.” US Telegraph Company tried to enter by consolidating freelance corporations within the early decennary. However, in 1866 Western Union acquired its last 2 competitors and reached its position of market dominance. It had been a nationwide monopoly with over 90% of the market share. US government tried to manage each session over this monopoly however Western Union's lobby was sturdy enough to place a hold on any rules passed against it. throughout now several tried to enter like communicating Telegraph, Atlantic and pacific Telegraph however none may last against this large. It became the eleventh company on the Dow Jones stock index in 1884. Throughout this Western Union was attempting to diversify transportation teleprinter services, chartered private-line electronic equipment, and postal order service, furthermore as telegrams and mailgrams and fax. The Western Union was the first to bring singing telegrams in 1933, and in 1964 it introduced a continental microwave signaling system, commutation the poles, and telegraph wires system to supply quicker transmission and create its services accessible to additional folks.
Fax your pressing messages:
Western Union established a Telex network, a client-customer switched network product of teleprinters using telegraph methodology for end-to-end customer communication quite like the telephone. (Figure 3) Enter Fax machines (electric telegraph), with the introduction to the facsimile technology Western Union introduced its 1st desk-fax service in 1948. At first, the document scanned using a telecopier (fax machine), which processes the content like a fixed image, and maps them into bits which are sent over a telephone system using audio frequency tones. At the receiver’s side, the teleprinter (fax machine) converts the tones into the image which is then printed on the paper. To form telegraph services more economical and quicker they determined to use satellite services. For this, they worked with Hughes corporation unitedly with National Aeronautics and Space Administration and launched one in every of the half dozen satellites Westar one on Gregorian calendar month thirteen, 1974. until 1982 they launched another five satellites. They engineered the TTC system together with a transport system for higher measurement chase and management of those satellites. Initially, Westar one was used for its own internal communications, like causation telegrams and mailgrams to Western Union bureaus and U.S. post offices severally2. Some TV and radio channels like PBS, NPR, and also the Mutual Broadcasting System, used it for causation tv and radio programming via satellite to their native affiliate stations until 1980. Westar one was shortly utilized by HBO1 for its launch nationwide use of satellite distribution to cable corporations in 1975.
Westar one retired in Gregorian calendar month 1983, however, will still be visited nowadays by contacting Westar Satellite Services. one in every of the TT&C & transmission sites for Westar in Glenwood, area unit currently serving because the transmission facility for SiriusXM Radio service.
“The railroad may ultimately have changed America even more than the telegraph but, the railroad was originally conceived as a local and regional facility whereas the telegraph was interregional in its impact from its very beginnings”. Professor Richard. B. Du Boff (Cambridge University )3
For more than a century telegraphy was popular for both domestic and international communication. As the radio and microwave transmission of telegraph increased the rates per message started decreasing and the Western Union started enjoying the economies of scale-up until mid-1940. Table 1 shows the number of messages sent from 1870 to 1970.
Fear from Hello:
Telegram although being popular still took a couple of hours to be received and has to be delivered by a Western Union messenger neatly dressed and committed to delivering the message no matter what. This last mile issue was then solved when Alexander Graham Bell invented the telephone. Although around 113 years post the death of Antonio Meucci, in 2002 the US congress has passed the judgment stating Antonio Meucci’s "Telefono", which was demonstrated in New York in 1860 and was declared the inventor of the telephone. And Bell who had access to Meucci's materials took the patent in 18764. Bell offered the patent technology to offered Western union his patent for a 100,000 USD that was denied by Western Union. In an internal memo, Orton reportedly said “The idea is idiotic on the face of it. Furthermore, why would any person want to use this ungainly and impractical device when he can send a messenger to the telegraph office and have a clear written message sent to any large city in the United States?” Western Union may have taken this advantage however the management didn't see the unfolding of the telephone would happen therefore quickly and lost it to AT&T in 1890. At the start it was just for short calls it expanded via long lines turning the sport of communication around 1900. Still, around 97% of the calls were national calls. It had been a significant threat to the Western union because it was quick and additionally became economical over time than telegraph See Table 2
Western Union tried to enter the telephone business claiming that the idea of the telephone was stolen and tried selling their own phone. Bell counter sued for his patent violations and they won which made Western union completely quit the telephone industry and never enter into it on Nov 10, 1879. We all know what a grave mistake making Western Union one of history’s bad business decisions similar to Kodak which contradicts the quote by Thomas Gray “Ignorance is a bliss”. The last telegram was sent around 2006 by Western Union we can say it was a proper goodbye to a technology that served human communication for over a century.
AT&T took over Western Union and gave up on it
AT&T bought around 30% of stakes in Western Union and gained control over it in 1909. However, both the companies were not going in the same direction. Western Union suffered as the profit was never reinvested in the companies and mostly given out as huge dividends to the shareholders. AT&T took over and tried to restructure Western Union but soon has to give up because the Sherman Antitrust Act forced Standard Oil to break up in 1911 and then AT& T in 1913. The “Kingsbury Commitment” was realized by AT &T to prevent any such government action. The commitment was to divest AT&T of Western Union and allow independent telephone firms to interconnect with AT &T along with Postal Telegraph company.
First Electronic fund transfer:
Have you imagined money transfers without bank accounts? It was a privilege to even have a bank account yet there was an immigrant family who waited for the money to be received from their loved ones working in different countries. Western Union although lost on Telephone but was the pioneer to start money transfer using telegram around 150 years ago. Person A on Site A sent a telegram to Person B on Site B about the amount of money to be transferred to him/her. The western union station A would indicate station B that they have received money from A on Station A and then on Station B money was delivered to Person B. A transfer fee was charged for this to the person sending it. This is how to wire transfer started around February 1871. It became popular and the Western Union stations or agents network started to grow rapidly. In 1987 an investor named Bennet. LeBow gained the control over Western Union and appointed Robert. J Amman as CEO and President of Western Union. He made some strategic restructuring of the organization and divided it into two parts; the asset-based provider of communication services which includes money transfer services was transformed into a customer-based money transfer financial service. This would serve as a major source of revenue shortly. The other part was still the old telegram services for long-distance communication using analog voice and satellite communication.
Bank Outward remittance:
With the advancements in computers and the internet, banks wanted to capitalize on this feature called remittance using internet banking. All this was possible because of the Western Union’s idea of money transfer where the money never actually leaves the country’s boundaries. For this we need to understand that money that we transfer is not physical money but a net settlement with the Central bank accounts between the sender country and the receiving country. If the transfer is within the same country then either it can be done using their Nostro and Vostro accounts. A Nostro account is for the sender bank explained as "our money that is on deposit at your bank” to receiving bank for which it is a Vostro account where “your money that is on deposit at our bank”. We also need to understand that when we transfer money by using SWIFT, IBAN, IFSC, etc, it is an electronic message which is sent to the receiving bank to update their ledger about the credits and debits and the original receiver(individual) would see the money credited to their individual account only when the Gross money settlements between these banks take place. This process may not be real-time and may take days if the sender bank does not have a Nostro account in the receiving bank, and hence they approach other banks to open a Nostro account and the entire process requires additional charges and money conversion rate (Forex). So as long as your bank has Nostro accounts with each other, it is faster, but all these are regulated using the Central banks in every country.
For these complex systems of transfer, the bank charges several fees like sending bank fees, intermediary fees, network fees, exchange rate fees, receiving bank fees (Figure 4).
TransferWise made remittance simple:
All this while we forgot that money actually never leaves the country and that was used by TransferWise which made remittance easy. Alice sends and the Bob in a different country receives. But no money is sent. After each period, only the balance amount (Net of the ledger) is sent once. They used the same method like Western Union but using the internet they made the transfer faster and costs cheaper. They have their own wallets (TransferWise accounts) in different countries. So if Alice wants to send money from India to Bob in America, Alice’s money would be credited to the Indian account of transfer wise and from an already existing account of TransferWise in the US Bob will get the money in USD. This reduces the hidden charges taken by the bank.
Conclusion:
With the advancement of technologies and increase in transparency of the international transfer, many Fintech companies have emerged like PayPal, VISA, MasterCard along with individual banks lowering the rate of services fees. In this case, TransferWise was taken as an example of a threat as it is closest to the model in which Western Union operates in the business. The other Fintechs are mostly operating in making payments simpler. Given all these disruptions, Western Union remains the most widely used cross-border money transfer company so far (Figure 5). Although the market share has dropped down by 10% by these competitors the cost of customer acquisition for other fintech start-ups will be higher than Western Union as it continues to grow in mobile application and competing with prices as similar to them.
With the history of many companies trying to acquire Western Union and giving up this company is a classic example of survival of fittest and has survived and flourished in many aspects even with the disruption in the traditional market of communication. The question remains as to how Western Union will continue to keep its position with all the existing banks, fintech start-ups, and financial institutions jumping in the playground of Money Transfer.
Western Union Timeline in detail: https://www.zippia.com/western-union-careers-11543/history/
References:
https://business.westernunion.com/en-gb/blog/from-bicycles-to-satellites-the-story-of-western-union
https://www.history.com/news/10-things-you-may-not-know-about-the-pony-express
https://eh.net/encyclopedia/history-of-the-u-s-telegraph-industry/
https://www.britannica.com/topic/Western-Union-Corporation
https://www.latimes.com/archives/la-xpm-1994-09-20-fi-40749-story.html
https://en.wikipedia.org/wiki/Western_Union
https://www.theguardian.com/world/2002/jun/17/humanities.internationaleducationnews
https://truewestmagazine.com/a-bad-call-on-the-telephone/
https://www.saveonsend.com/blog/western-union-money-transfer/
Business Demand and the Development of the Telegraph in the United States, 1844–1860 by Richard B Du Boff.