Western Union, a leader in cross-border, cross-currency money movement, has acquired a 15% stake in the digital payment unit of Saudi Arabia’s STC Group for $200 million, Reuters reported.
The move follows the trend of digital payment that is threatening the leading position of the world’s largest transfer firm in the money transfer services.
Western Union hopes the 5 billion riyals ($1.3 billion) will pave the way for its long-term expansion plans, according to Saudi Arabia’s largest telecoms operator.
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Mohammed bin Khalid Abdullah Al Faisal, STC Group chairman said the investment reflected the company’s position as a “digital enabler”. He said the deal created the first “Saudi unicorn and the first fintech unicorn in the Middle East”.
Western Union has been caught up in the rising wave of fintech, and Saudi Arabia’s push to reduce dependence on cash opened the way for the cash transfer company to expand further its space in the digital payment world.
STC said its stc pay unit is the first licensed fintech company by the Saudi Arabian Monetary Authority, the Saudi central bank, and has more than 4.5 million users.
STC Pay is a financial company that launched a digital wallet mobile application in 2018. The e-platform provides digital and financial services to individuals and companies, and facilitates financial transactions and payments.
The evolution of fintech is threatening the dominion of money transfer companies like Western Union and Moneygram, forcing them to embrace alternate payment systems. Western Union is therefore looking to grab more space in the digital transfer industry, and a move to the oil rich Saudi Arabia sets the path rolling.
The company has been widening its partnership with web and mobile wallets platforms as an alternative to dwindling banks transfer model.
In March, Western Union teamed up with Thunes, a cross-border payments network for emerging markets, to send funds directly into mobile wallets around the world.
It’s part of Western Union’s push to grab more market share through financial inclusion on a global scale.
“We are continuously expanding and enhancing our account payout portfolio, providing customers with multiple payout options including bank accounts, cards or mobile wallets,” said Sobia Rahman, Global Head of Account Payout Network for Western Union. “Our goal is to make digital money transfer services more accessible, with a specific focus on enabling mobile transactions.”
While there has been a proliferation of fintech platforms, it lacks a global unified payment system that will enable financial transactions across continents. It is a friction that the Western Union is trying to solve with its global network, and counting on to maintain its lead in the market.
The money transfer company is operational in over 75 countries, and has a global network of four billion accounts and wallets across 100 countries, in addition to a vast agent retail network in 200 countries and territories, according to its website.
Western Union’s digital payment services, so far capture all the top 20 of the world’s primary remittance sending countries ranked by the World Bank. The company’s global account and wallet payout network covers the world’s major remittance receiving countries.
With its dominance, the company is focusing on partnership with existing and emerging fintech companies to expand its financial services. Part of its goal is to reach those who lack access to traditional financial services, by connecting them to alternative payment solutions, such as mobile wallets.