- Key insights: Western Union is looking to use stablecoins to earn float revenue on money moving through its network. But the possibilities don’t end there.
- What’s at stake: Western Union’s CEO has been focused on transitioning the 175-year old company, which began as a telecom company, into a digital first company.
- Forward look: Western Union’s stablecoin, U.S. Dollar Payment Token, or USDPT, is expected to launch this year.
NEW YORK — For Western Union, stablecoins are about more than just moving money faster; they are a way to turn a cost center into a revenue generator.
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“We’re trying to move money around the world, principally for ourselves, and in a much more efficient and effective and capital-light way,” Western Union CEO Devin McGranahan said at the Digital Asset Summit in New York on Tuesday.
The idea is to turn a “negative float” into a positive float, he said.
“I have a cost of capital associated with the billions of dollars that I have to keep in the system to make this value proposition of instant movement of money around the world work,” McGranahan said. “And if one of my partners decides to hold that for some period of time in order to settle, I’m making money on the money, versus today I am paying someone for the money my partner is holding.” In this scenario, Western Union earns interest revenue from the underlying treasuries backing the stablecoin.
Owning the float was a driving factor in Western Union’s decision to have its own stablecoin, which is called U.S. Dollar Payment Token, or USDPT. USDPT is
The company also has its own
Stablecoins are also a way for Western Union to manage its compliance risk across the 200 countries and territories in which it operates.
“Having our own coin allows us to program it in ways that can manage our compliance risk. We can create different situations between different partners on the terms in which we transact with each other,” McGranahan said. “We can embed rewards in a way that we can design, because it’s our coin, and we can do it on a partner level, versus if we’re using a generic coin.”
Launching its stablecoin – which is expected sometime this year – and turning on receive capabilities for USDPT so that customers in inflationary and politically unstable regions can hold dollar-denominated assets are the company’s top two priorities for stablecoins, but McGranahan can see a world where Western Union eventually opens its network up to smaller community banks.
“If we now have an institutional grade ability to move money between trading partners in 50, 60, 70 countries in the world in a highly regulated environment, we believe that is… a valuable thing that other people will want to take advantage of,” McGranahan said. “If you run a $2 billion community bank… you’re highly dependent on your correspondent banking relationships and the SWIFT system, and it takes five days, and it’s not really traceable and it’s expensive. We think we can move that.”
McGranahan also said that stablecoins provided an opportunity to offer additional financial services to customers in receiving markets that may want to hold dollar-denominated assets, such as savings accounts or even loans.
“We’re not going to go operate a bank in Bolivia. That’s not a good idea, but it changes what we can do for our customers in those receipt markets,” he said.
MCGranahan joined Western Union in 2022 and has been focused on transitioning the 175-year old company, which began as a telecom company, into a digital-first company, and stablecoins, along with improving its technology stack and opening its network to third-party providers, have been a key pillar to that effort, according to analysts at William Blair.
Largely the effort has been moving in a positive direction, albeit slowly, according to the analysts.
“We see a clear use-case for USD-denominated stablecoin holdings by remittance receivers in highly inflationary / FX-volatile economies as a means to mitigate purchasing power erosion,” according to a William Blair analyst note. “Further, stablecoin-enabled solutions should increase settlement speed and lower distribution partner pre-funding requirements, essentially reducing reliance on the historically constrained correspondent banking systems and improve capital efficiency.”