It’s not every day you get to hear from the CTO of a financial incumbent who has actually mined bitcoin.
So, interest was high as David Thompson of global remittance giant Western Union took the stage at MoneyConf 2017 in Madrid, Spain. And he did not disappoint, facing the digital currency issue head on.
“Customers have been asking us if digital currency is going to wipe out the remittance business,” he said.
According to the CTO, the answer is no. Thompson revealed cash-based transactions are on the rise in many of Western Union’s developing country markets. And anyway, he added, “the regulators are really pushing back on digital currencies because of the anonymity.”
It may come as a surprise, therefore, that Western Union is trialing an integration with digital currency exchange Coinbase, in which Western Union will appear within the web app of the exchange.
In conversation with CoinDesk, Thompson revealed that the project entered into development last fall, and is currently being piloted with Western Union employees. No launch date has been set, but an announcement could be forthcoming.
Thompson stressed, however, that it will not be for digital currency transactions, but instead, on the back-end for fiat transfers.
“Until digital currencies become regulated and integrated into the law, we are not going to include that on the platform. Our regulators are quite direct with us; it’s not something they are [allowing us] to enable.”
Thompson went on to detail other blockchain developments the remittance company is working on.
After a planned pilot with Ripple a few years ago failed to materialize (there was apparently not broad enough adoption among banks), the team has continued to investigate possible use cases for the technology. One that’s compelling is using blockchain to standardize bank integrations (Western Union’s app currently integrates with about 2 billion bank accounts), Thompson said.
But, perhaps one of the use cases with the most immediate effect on Western Union’s bottom line is blockchain’s possible role in streamlining compliance. Thompson revealed that Western Union is working on a blockchain-based know-your-customer (KYC) compliance pilot, focusing on bringing down its hefty compliance costs, which currently reach approximately $240m a year.
In addition, Thompson said, Western Union is investigating how the technology can be leveraged for real-time settlement, integrated smart contracts for import/export transactions and alternative payment types. Could the alternative payment types one day include digital currencies? Thompson conceded that may happen “over time as changes are made in regulation around the world”.
While non-committal, Western Union does appear to be getting ready for that day.
And as digital currency regulation advances, and assuming the integration goes smoothly with Coinbase’s platform, the remittance company will be in a strong position to bridge the gap between incumbent financial services and alternative stores of value.
Disclosure: CoinDesk is a subsidiary of DCG, which has an ownership stake in Coinbase.
Image by Noelle Acheson for CoinDesk