Western Union Financial Services, Inc. Business Information, Profile, and History

Company Perspectives:

We believe there is something beyond building a business that gives a company a higher purpose. The Western Union higher purpose is to help people improve the quality of their lives. We believe a company, with both its human resources and financial resources, should make the world in which it lives a better place. We believe in Family. For nearly 150 years, we have helped people provide for their families. We also want to provide for our family of customers, by helping them in their daily lives. We believe that with the power of success comes the privilege of caring. Helping. Building. Sharing. Strengthening. Healing. Teaching. And most importantly, the privilege of touching lives. We believe in the power and passion of our employees, who bring not only their diverse talents to our business, but also their tireless energy and commitment to our community activities as volunteers. We believe as part of our global commitment to our consumers and their families, our international outreach program must focus on three critical areas: Education, Health and Immigrant Resources. To do so will help people improve the quality of their lives throughout the world. We believe all great ideas begin with "What If ...". Western Union is proud to bring many great ideas to fruition with the Western Union Helping Hands program.

History of Western Union Financial Services, Inc.

Western Union Financial Services, Inc. operates the world's largest money-transfer network, comprising more than 117,000 agent locations spread throughout more than 185 countries. Through its network, consumers and businesses are able to transfer money or make payments with money orders and other electronic systems. Western Union sells more than 250 million money orders annually. The company operates as a private subsidiary of First Data Corporation, a payment services company.

Origins

Western Union, the financial conduit to the world, started operating in 1851 as The New York and Mississippi Valley Printing Telegraph Company. The company, its name defining the boundaries of its operating territory, was formed by a group of Rochester, New York, businessmen, whose geographic ambitions soon escalated. In 1856, the company changed its name to The Western Union Telegraph Company, reflecting the union of telegraph lines in the western United States with telegraph lines in the eastern United States. An integrated system had been calved by cobbling together a number of rival telegraph lines, giving birth to the Western Union name that would enjoy household recognition for the next century and beyond. Evidence of the familiarity of the Western Union name throughout the country was demonstrated by its inclusion within the U.S. dialect. Much like the brand name Kleenex would come to represent a tissue, Western Union became synonymous with a telegram.

Throughout its history, Western Union displayed the talents of an innovator. The company's 10th anniversary coincided with the outbreak of the Civil War and the completion of the first transcontinental telegraph line, which enabled fast, coast-to-coast communications for the next four years of bloody and intense warfare. Western Union's completion of the first transcontinental telegraph was followed by several other pioneering developments credited to the company during its formative years. Much of the company's early success on the innovation front could be credited to one of its employees, an icon of U.S. ingenuity. Western Union telegrams were conveyed by a Morse operator who tapped out Morse code on keys. One of the company's Morse operators was Thomas Edison, whose early inventions were completed under the auspices of Western Union. In 1866, Western Union introduced the first stock ticker, which provided brokerage firms with New York Stock Exchange quotations. The glass-domed device was Edison's invention.

During Western Union's first decades of existence, the company's milestones occurred at five-year intervals, beginning with the adoption of the Western Union name five years after the company's founding. The completion of the first transcontinental telegraph line occurred five years later, followed by the introduction of the first stock ticker, which lent unprecedented sophistication and geographic expansion to the stock distribution side of the company's business. Five years after Edison's stock ticker made its debut, Western Union entered what would become its single most important business during the modern era. In 1871, Western Union introduced the concept of wiring money, a business that would eventually replace message sending as the company's primary business.

The importance of the foray into wiring money was not to be underestimated, but its importance grew gradually. During the late 19th century and for much of the 20th century, Western Union made its money and earned its reputation as a conveyor of communications, with the company's uniformed messengers serving as the living symbol of telegrams to a fast-growing population sometimes separated by thousands of miles. Western Union's role in enabling individuals, companies, and institutions to communicate with each other became an indispensable component of daily U.S. life, a role whose efficacy and breadth of involvement was predicated on innovation. Western Union developed new ways to communicate, and increasingly, the company's efforts tilted toward the financial sector, as first highlighted by its involvement in the stock distribution business. Before entering the 20th century, Western Union celebrated one last distinction that confirmed the company's significance. In 1884, Western Union was selected as one of the original 11 companies whose stock values became the benchmarks of the Dow Jones Industrial Average.

A 20th-Century Innovator

Western Union's development during the first half of the 20th century was punctuated by an impressive list of innovations. In 1914, the company introduced the first consumer charge card. In 1923, Western Union introduced teletypewriters, which enabled companies to communicate with their branch offices. During the 1920s, the company also pioneered the first practical use of a device that could send pictures over telegraph wires for press services, an invention that represented the precursor to the modern-day facsimile machine. A little more than a decade later, in 1935, Western Union introduced the first public facsimile service, connecting Buffalo, New York, and New York City. The company's knack for delivering revolutionary technology exhibited itself one more time before end of the first half of the century. Midway through World War II, in 1943, Western Union introduced the first commercial microwave system to connect one city with another city.

Despite the remarkable achievements recorded by Western Union during its first century of existence, the company's centennial anniversary was dampened considerably by its financial condition. From the end of World War II into the 1950s, Western Union struggled, its balance sheet pocked by a host of foibles. To correct the ills, the company diversified into the telex, developing a desk-model machine that provided direct-dial, consumer-to-consumer teleprinter service. The advent of the machine sounded the death knell for uniformed Western Union messengers. The singing telegram, introduced in 1933 by Western Union's publicity director, George P. Oslin, soon disappeared.

During the 1960s, Western Union intensified its attempts at diversification. The broadening of the company's operational scope engendered growth, prompting Western Union's management to embark on a diversification program that progressed throughout the 1970s and into the 1980s. Against the backdrop of growth and diversification, the Western Union legacy of innovation continued. In 1964, the company unveiled its transcontinental microwave radio beam system. The use of the system rendered obsolete the myriad poles and wires stretching across the country. A decade later, Western Union could claim it had expanded into space. In 1974, the company launched the first domestic communications satellite for the United States, the Westar 1. In 1982, less than a decade after launching Westar 1, Western Union became the first company with five satellites in orbit.

Financial Problems Surfacing: 1980s

Not long after launching its fifth satellite, Western Union began to experience the effects of decades of diversification. Although the sprawl of the company's domestic and international operations had delivered robust revenue growth, the increases in the company's sales had not always marched upward with its profits. As the company entered the mid-1980s, signs of financial trouble began to emerge. When the extent of the damage was revealed fully, the company found itself floundering in severe financial straits far more serious than its postwar financial crisis.

Western Union's pursuit of new business and new markets created problems on the company's balance sheet. Over time, its operations had become too far-flung and incurred too much debt for it to survive without making wholesale changes. In 1984, the problems related to overextending itself became manifest, as Western Union found itself suffering from a severe liquidity crisis. The problem persisted for an oppressively long time, hobbling the company's progress for a decade. Ultimately, Western Union's dour financial condition required the most severe of corporate responses. The venerable company, one of the leading pioneering enterprises of the world, was forced to declare bankruptcy, filing for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code in 1994.

The reorganization required by Western Union's Chapter 11 status engendered the company's final transformation into a financial services business. The company's message-sending business had become a part of U.S. culture, but its corporate roots became a thing of the past when all of its telecommunications businesses were divested during the reorganization. Once stripped of these businesses, Western Union was left to concentrate exclusively on financial services, primarily the money wiring business it had invented more than a century earlier. The final stage of the company's attempt to resurrect itself would occur on September 19, 1994, when the auction of Western Union was scheduled to occur. Thoroughly revamped, Western Union waited during the summer of 1994 to find out who its new owner would be.

New Life As a Subsidiary Company Beginning in 1994

The two companies who expressed the greatest interest in acquiring Western Union were Forstmann, Little & Co. and First Data Corporation. By August 1994, First Data, a payment services company based in Hackensack, New Jersey, had emerged as the leading contender. First Data submitted a $660 million bid in August. At roughly the same time, the Federal Trade Commission (FTC) launched its first antitrust challenge against the merger. Because of the similarity of the two entities, the FTC alleged the merger would create a monopoly, combining Western Union's own massive money-transfer business with First Data's payment system, known as MoneyGram. To ease the FTC's concerns about the development of anti-competitive practices in the money-transfer business, First Data signed a consent decree in August. By the following month, First Data had prevailed. Western Union, an independent concern for nearly 125 years, became a private subsidiary of First Data, marking the beginning of a new era for the company.

Under the governance of First Data, Western Union emerged from its decade-long malaise with renewed vitality. Since Western Union's invention of the money-transfer business in 1871, the way in which the system operated, not surprisingly, had changed substantially. The Morse keys and sounders operated by Thomas Edison had been replaced with a network of agents connected through the Western Union computer system. The agent locations were situated in supermarkets, check-cashing outlets, mailbox stores, and sundry other retail establishments. Money-transfer, aside from the technological changes, had become an incredibly large business, enjoying exponential growth during Western Union's final transformation into a company exclusively focused on financial services. In 1986, there were eight million money-transfer transactions. A decade later, as Western Union embarked on its new era of existence under the control of First Data, there were more than 30 million money-transfer transactions.

As Western Union focused on dominating the business it had first developed, the company increasingly bolstered its global presence. In 1992, the company began the first consumer instant money-transfer service between the United States and Russia. In 1993, while still in the throes of its financial crisis, the company launched its Dinero en Minutos (Money in Minutes) service in Mexico, a new currency transfer service that enabled travelers in Mexico to pick up cash in pesos at any of the nearly 300 locations operated by Elektra, a leading furniture and electronics retail company based in Mexico. At roughly the same time, the company introduced electronic funds transfer in Africa, entering Ghana in 1993 and expanding into South Africa, Ethiopia, Zambia, Senegal, Kenya, Nigeria, Uganda, and Eritrea during the subsequent two years. International expansion fueled much of the company's growth during the mid-1990s, particularly its advances in Mexico, which accounted for a fifth of its international financial growth in 1995. Consequently, the company strengthened its ties with Elektra at the beginning of 1996, signing a 10-year agreement with the retailer. Later in the year, Western Union opened its North American headquarters in Englewood, Colorado, and opened new regional sales offices in Paris, Vienna, and Hong Kong.

Western Union's aggressive expansion during the 1990s could be charted by the growth of its agent network. The company had less than 20,000 agent locations during the early 1990s. By 1998, Western Union's money-transfer service had expanded to 50,000 agent locations worldwide, representing the world's largest money-transfer network. By the end of the decade, there were more than 80,000 Western Union agent locations scattered throughout more than 140 countries.

As Western Union entered the 21st century, it promised to figure as a dominant player in the money-transfer business. The company launched westernunion.com in 2000, inaugurating the extension of money transfer to the Internet. The following year, the company celebrated its 150th anniversary by eclipsing 100,000 agent locations, a more than fivefold increase in less than a decade. In 2002, as part of its consistent efforts to expand payment options on the Internet, Western Union launched its Consumer Web Payment Service, enabling customers' funds to be debited electronically from their checking accounts and funneled toward designated payments. In the years ahead, the company intended to maintain its market leadership by continuing to offer its clients a comprehensive array of bill payment capabilities, both online and offline.

Principal Subsidiaries: Paymap Inc.

Principal Competitors: CheckFree Corporation; MoneyGram Payment Systems, Inc.; United States Postal Service.

Chronology

• Key Dates:
• 1851: Western Union's predecessor, The New York and Mississippi Valley Printing Telegraph Company, is founded.
• 1866: Western Union introduces the first stock ticker.
• 1871: Western Union introduces the concept of wiring money.
• 1964: A transcontinental microwave radio beam system replaces telegraph poles and wires.
• 1982: Western Union becomes the first company with five satellites in orbit.
• 1994: Western Union declares bankruptcy, and is acquired by First Data Corporation.
• 1998: Western Union's money-transfer network ranks as the largest in the world.
• 2000: Westernunion.com is launched.