Goodbye, Western Union?
Firm laying off 169 digital workers, essentially shutting down S.F. office
The news came not over the teleprinter but in a bland government document posted online: Western Union is laying off 169 employees and essentially shuttering its San Francisco office, the home of WU Digital.
If you’re surprised to hear Western Union had a San Francisco office, let alone 169 employees there, I don’t blame you. The company opened the outpost in 2011, intent on competing with the likes of Square, Stripe and PayPal on their home turf for engineers and product designers. I toured the office in China Basin, across from the ballpark, not long after that. The employees had all the trappings of startup life, from a wellstocked break room to the usual toys.
It seemed to be working, at least according to company executives. In 2018, Western Union CEO Hikmet Ersek told McKinsey Quarterly how he had tapped Khalid Fellahi, head of the moneytransfer giant’s Africa business, to run the digital office, calling it a “startup within the broader company.”
“Now our digital business is the fastestgrowing part of Western Union,” Ersek said.
Yet Western Union was still a big, lumbering company. The Glassdoor reviews on the San Francisco office have a theme: Love the decor, hate the bureaucracy. Employees complained about overlapping projects, work moving to India and a focus on quarterly earnings.
The office’s fate became clear in recent months, if you knew how to read the subtlest of corporate tea leaves. In June,
Western Union and Visa announced a “collaboration” that suggested Western Union was leaning heavily on the much larger payments company’s technology. And on Aug. 1, as Western Union announced its quarterly earnings, it unveiled a new “global strategy designed to drive improved efficiency,” meaning it would cut $100 million in annual costs starting in 2021. Revenue was down 5% for the quarter.
Strangest of all, a letter sent by the company to state and local officials reveals that Western Union is stretching the job cuts into next year, laying people off a handful at a time over the coming months. It may help Western Union make its numbers, but it can’t help morale. A Western Union spokeswoman declined to comment.
If you want to understand Western Union’s problems, you can go back to the last time when the closure of one of the company’s offices made headlines in The Chronicle. That was in 1986, when Western Union closed its last San Francisco moneytransfer office on Howard Street, just blocks away from the future site of WU Digital.
The company’s answer was to send customers to some 20 retail locations where independent agents could send and receive money transfers for them.
Those retail locations still exist today, in places like Safeway grocery stores. In fact, they have grown vastly more numerous. Shifting from running its own offices to signing up a network of agents made Western Union a giant of global money transfers even as its telegram business was dissolving. Western Union touts the fact that it has 550,000 retail locations today.
But for the rising smartphone generations around the world, those retail locations and the fees Western Union must charge to compensate agents for their work are a burden. In the U.S., there’s PayPal and its Venmo subsidiary, Square’s Cash App and many other cheap ways to send cash person to person. Around the world, some places are even more innovative, like Kenya with MPesa, a payment system built on top of mobilephone accounts.
For international transfers, PayPal has Xoom, a business it acquired in 2015, and there are startups like Remitly and Transferwise as well.
It’s not clear to me how Western Union will be better able to fend off all that competition without its San Francisco office. But I’ll leave you with a thought that John Schmidt of Medford, Ore., shared with Chronicle reporter Maitland Zane in 1986 when he learned Western Union was shutting its San Francisco office, which he was visiting: “Those corporate types are so tight, they squeak.”
This story was adapted from Tech Chronicle, our thriceweekly email newsletter of the latest from Silicon Valley with a San Francisco spin. Subscribe at sfchronicle.com/ newsletters/techchronicle.