Change is the only constant in today’s ever-evolving business landscape and with it comes the need to stay nimble. Reacting to customer needs and an increasingly competitive industry, Western Union has done just that – shifting away from a traditional business model and undergoing a significant transformation to support new digital initiatives and expanded global offerings. I recently spoke with CFO Raj Agrawal to discuss what’s needed from the finance team when a company undergoes this level of change and why its oversight is of critical importance to whether or not it succeeds.
This interview has been edited and condensed.
Jeff Thomson: In the last ten years, Western Union has undergone a significant transformation, putting increased focus on digital initiatives and expanding offerings across the globe. You started working with Western Union in 2006; what roles have you and the finance function played in this transformation?
Raj Agrawal: Here at Western Union, we believe true leaders disrupt themselves. This has been our path to continued transformation: to leverage our strong core business, invest in technology, build relationships to further build an omni-channel presence for our customers, and create business opportunities around the world. We continue to focus on growing our core business, including consumer-to-consumer, business solutions, and digital. We are also working to build new channels and serve new customers, meeting their rapidly changing needs. While we invest in these opportunities, we’re also dedicated to generating strong cash flow and returning it to stockholders directly. My team continues to play a vital role in this growth, leading efforts to properly reallocate resources and financial investments to help drive key strategic areas within the business. It has been equally important transforming our business model from a more traditional one to one that properly positions us to meet our vision for the future, at the same time, ensuring proper financial due diligence is factored in. This includes understanding the unique aspects from a financial modeling and business forecast standpoint. In an increasingly regulated landscape, the culture of compliance becomes even more important. My team has helped ensure that the right resources in the right geographies are properly allocated to create a strong culture of compliance everywhere we operate. Finally, the finance team has been intricately involved in optimizing our pricing structure.
Thomson: How crucial is the oversight and involvement of a finance team when a company is undergoing this level of change?
Agrawal: It is of critical importance. The Finance team is responsible for formulating the company strategy with its business leaders, then converting that strategy into financial opportunities. In doing so, it is important to understand and address any financial impacts associated with major strategic shifts in strategy due to the transformation. We’ve been successful to this point. The strategy has resulted in a resilient and solid business model which generates strong cash flows, year over year, even while making strategic investments in infrastructure, such as compliance and technology. In 2015 alone, we generated more than $1 billion of cash flow from operating activities and returned over $800 million to stockholders.
Thomson: As a money transfer and payments company, Western Union has faced increased competition from fintech players such as PayPal, Stripe and Transferwise. How have you altered your business strategy to stay competitive?
Agrawal: I wouldn’t say we’ve necessarily altered our strategy, but rather focus and enhance the key differentiators that position us ahead of competitors. We continue to grow our payout network to enable us to move funds out of our cross-border platform quickly, seamlessly, at a low cost and in a growing number of ways. Our cross-border platform is what sets us apart from the competition and is a key differentiator in the industry. Competitively, we believe we are well positioned with our brand, payout network, cross border compliance and operational capabilities, and continued development of our digital platforms and services. In addition, customers trust our brand, and we continue to deliver very strong growth through our products, services and partners. This also includes our ability to leverage technology to deliver faster, more effective ways of moving money across borders through our cross-border platform, which is comprised of multiple pay-in and pay-out options for our customers. We continue to invest in our technology backbone to improve the customer experience—bringing customers the ease of use and the accessibility that we know drives money transfer and payments decisions. It is important to note that most competitors only perform domestic person-to-person transfers – with just the option of using a card or bank account. This business has a very low barrier to entry. As a result, many of them are not profitable. Today we are investing in relationships with digital and social media players, we are increasing the number of ways consumers can move funds into our system for cross-border money transfer and payments, and we are building out our payout network to enable us to move funds across borders quickly, seamlessly, at a low cost and in a growing number of ways. As a result, we are making it ever easier for consumers and businesses to transfer money almost anywhere in the world, and attracting new customers to the WU brand.
Thomson: Aside from increased competition, Western Union also faces the challenge of fluctuations in global economic growth, currency volatility, disruptions in various countries, and the need for increased investment in regulatory and compliance initiatives. As the CFO, how do you stay nimble in the face of an ever-changing industry? What skills do you feel best serve you when facing these challenges and what skills do you find most valuable from your team?
Agrawal: As a truly global company, we are very diverse, with 16,000 corridors across more than 200 countries and territories, and the need to transfer money is generally not discretionary. It continues to be a resilient business, although economic conditions obviously affect how much money people have to send. Since joining the company in 2006, I’ve become very accustomed to dealing with changing environments. I’ve learned to adapt resources, services, and marketing among the 16,000 corridors as appropriate. Outside of this, another benefit of being a global company is while some currencies devalue, others strengthen, which lends the opportunity for us to create a nice balanced portfolio. From a financial perspective, I’ve learned to factor this in when having to conform to the dynamics of such a rapidly changing industry. In addition, we serve people worldwide whose financial needs were overlooked or unmet by other institutions with the goal of being able to serve them anytime, anywhere, and in any way they want. WU’s core customer base is predominantly comprised of migrants, who have moved from their home to their host country for a variety of reasons, be they economic, financial, and family-driven. History has shown that, over time, migrants make extraordinary contributions to both their host communities, and also to their home communities, for instance in the form of remittances sent back to family and friends.
Thomson: In the face of global company-wide transformation and macroeconomic challenges, how are you achieving financial growth?
Agrawal: Quite simply, we are where our customers need us to be. Our omni-channel approach provides both consumers and businesses with choice —in products, in services, and in how, when and where they can access the service. This involves investing in and growing our retail footprint, but also expanding our digital points of presence. Customers are looking for different options to send money. Whether it is bank-to-bank, Web or app-to-cash or from an ATM/kiosk, we offer fast, secure and easy to use digital platforms to send money. Today, we have more than 550,000 Agent locations worldwide, a web presence in 37 countries, the ability to send money to billions of accounts, and established partnerships with telecommunications companies in more than a dozen countries to further strengthen Western Union’s mobile money capabilities. Recently, we launched a new innovation called WU® Connect, which is a technology platform that embeds Western Union’s robust digital global money transfer capability into third-party social media and messenger platforms, including Viber and WeChat, providing users with new ways to send money to friends and family. Above all, we focus first on retaining the trust of consumers and businesses that use our services. We truly believe our business is good for society, and we never forget that every transaction has the potential to change lives for better.
This article was written by Jeff Thomson from Forbes and was legally licensed through the NewsCred publisher network.