Western Union Co. announced the launch of a partnership with U.K.-based fintech Bud, a mobile platform that allows customers to access all of their bank accounts and financial products in the same place.
Under the partnership, Bud customers will be able to use Western Union's money transfer services directly with the Bud app, Christina Hamilton, Western Union's vice president of partnerships and international expansion, told delegates at the Fintech World Forum in London on Nov. 22.
"We will take care of the [know your customer] and fraud prevention, and Bud will provide the platform," she said.
The partnership with Western Union will allow both companies to "build relevance" in the payments market, Jamie Campbell, Bud's head of awareness, said in an interview on the sidelines of the conference.
Among those who will have access to Bud's platform are customers of HSBC Holdings Plc's telephone and internet bank, First Direct Ltd, as Bud signed a partnership with HSBC in October. Under that agreement, Bud will give First Direct customers access to its platform — in which they will be able to set budget limits, analyze their spending and track payments — for a six-month trial period starting in December.
"Our strategy is to partner with major brands," Campbell, said. "Customers tend to be much more comfortable dealing with large, trusted institutions than with unknown fintechs. The deal with HSBC is the first one that we've done with a large distribution partner so far. We can provide a better service, but the bank gets to keep the customer and can even attract new ones."
Changing industry
The partnership agreements come at a time when U.K. financial institutions are preparing for the second European payment services directive, which comes into force in January 2018. Under PSD 2, banks will have to give third parties, such as fintechs and payment providers, access to accounts and customer data in order to initiate payments and provide services such as budgeting apps.
Western Union is also focusing on developing partnerships with incumbent banks in order to provide "high volume, low value" transaction services, such as international payments and the sending of remittances, Hamilton said. As banks become increasingly concerned about money laundering and fraud, they are shying away from such services, which are perceived as risky and expensive to run, but a number of lenders have struck partnerships that effectively outsource the service to Western Union, she said.
Western Union has partnerships with Barclays Plc, Intesa Sanpaolo SpA and Bank of Nova Scotia to provide money transfer and remittance services.
Barclays announced in 2013 that it was backing out of the money transfer business due to fears around money laundering and financial crime, cutting off swaths of customers remitting money to Africa and Asia. HSBC also pulled out of the remittances business altogether, having been hit with a record $1.9 billion fine by U.S. authorities in 2013 for a range of offences that included failure to take adequate measures to prevent financial crime.
