---
title: "How Western Union makes money from the unbanked"
url: https://modern-mba.com/case/western-union
sector: "Finance"
sector_url: https://modern-mba.com/sector/finance
published: 2023-07-09
updated: 2026-09-03
reading_time_minutes: 11
charts: 5
video: https://www.youtube.com/watch?v=29nSycLw_5A
publisher: Modern MBA
license: All rights reserved. Quote with attribution and a link.
---

# How Western Union makes money from the unbanked

Every bank is built to chase the wealthy: the less money in your account, the more you pay and the longer you wait. Western Union went the other way and built a network of 550,000 agent locations for people banks will not take — migrant workers with no account, no documentation and no time. This case study covers how the agent model works, why corridors decide pricing, how the company's pricing power collapsed from $25 a transfer to under $15, and why $9.2 billion of debt-funded buybacks is finally being replaced with an attempt to become the bank these customers were refused.

## Key figures

- **60,000** — US locations — more than the big five banks' branches combined
- **$25 → $15** — Average charge per transfer, 2006 against today
- **$9.2B** — Spent on stock buybacks since 2006, funded with debt

## The argument

The global financial system is built to serve the people who already have money. Banks lend out deposits, so the larger your balance the better you are treated — waived fees, better rates, a human being on the phone. Run the logic down and the poorest customers pay the most and wait the longest, which is why banks decline them: too little on hand, work that is seasonal and remote, missing documentation, no time to reach a branch in banking hours.

Western Union built its entire business in that gap. Not with branches, which would be ruinous, but with agents — 550,000 storefronts that already handle cash and already have the community's trust. Bodegas, liquor stores, post offices, check cashers, gas stations, supermarkets. It carries no land, no staff and no fixed cost, it inherits opening hours that banks refuse to keep, and it abstracts away the language and culture problem that defeats conventional expansion. In the US alone its 60,000 locations exceed the branches of Chase, Wells Fargo, Citibank, Capital One and Bank of America combined, and the US is a tenth of the network.

The flaw was monetizing one transaction at a time. Transfers rose from 150 million a year to over 300 million and principal from $53 billion to $96 billion, yet revenue fell from its 2011 peak, because pricing power collapsed: $25.03 on the average transfer in 2006, under $15 today. Management answered with $9.2 billion of stock buybacks funded by debt. Only now is the company trying to be the bank its customers were refused — which requires people who trust cash to trust a phone.

## Charts

### More outlets than the big five banks put together

US locations against the leading banks. Western Union has 60,000 storefronts to Wells Fargo's 7,146 — and the US is only a tenth of its network.

|  | Counts |
| --- | --- |
| Western Union | 60,000 |
| Wells Fargo | 7,146 |
| Chase | 5,100 |
| Bank of America | 3,900 |
| Capital One | 755 |
| Citibank | 653 |
| HSBC | 159 |

Source: Modern MBA, “How Western Union makes money from the unbanked”, published July 2023. Chart: https://modern-mba.com/case/western-union#chart-1 · Sources: https://modern-mba.com/case/western-union#sources

### Transfers have more than doubled

Consumer-to-consumer transfers a year. From 119 million in 2004 to a record 306 million in 2021 — the operating business has never stopped growing.

|  | Counts |
| --- | --- |
| 2004 | 119M |
| 2006 | 150M |
| 2008 | 188M |
| 2010 | 214M |
| 2012 | 231M |
| 2014 | 254M |
| 2016 | 268M |
| 2018 | 287M |
| 2020 | 290M |
| 2021 | 306M |
| 2022 | 274M |

Source: Modern MBA, “How Western Union makes money from the unbanked”, published July 2023. Chart: https://modern-mba.com/case/western-union#chart-2 · Sources: https://modern-mba.com/case/western-union#sources

### And the revenue from them has not moved in fifteen years

Consumer-to-consumer earnings. The line peaks at $4.6B in 2011 and is $4.0B in 2022, on more than twice the transfers — this is pricing power leaving.

|  | US dollars |
| --- | --- |
| 2006 | $3.8B |
| 2008 | $4.5B |
| 2010 | $4.4B |
| 2011 | $4.6B |
| 2012 | $4.6B |
| 2014 | $4.5B |
| 2016 | $4.3B |
| 2018 | $4.5B |
| 2020 | $4.2B |
| 2022 | $4.0B |

Source: Modern MBA, “How Western Union makes money from the unbanked”, published July 2023. Chart: https://modern-mba.com/case/western-union#chart-3 · Sources: https://modern-mba.com/case/western-union#sources

### Because each transfer got smaller

Average amount sent in a single transfer. $393 in 2008 against $297 at the 2017 low — the same customers moving less money, more often.

|  | US dollars |
| --- | --- |
| 2006 | $353 |
| 2008 | $393 |
| 2010 | $355 |
| 2012 | $342 |
| 2014 | $335 |
| 2016 | $298 |
| 2017 | $297 |
| 2019 | $303 |
| 2020 | $331 |
| 2022 | $341 |

Source: Modern MBA, “How Western Union makes money from the unbanked”, published July 2023. Chart: https://modern-mba.com/case/western-union#chart-4 · Sources: https://modern-mba.com/case/western-union#sources

### Sixteen years of buying its own stock instead

Annual cash spent repurchasing common stock, alternate years shown. $9.2B in total since 2006 — funded with borrowed money rather than operating cash.

|  | US dollars |
| --- | --- |
| 2007 | −$726M |
| 2008 | −$1,314M |
| 2010 | −$581M |
| 2012 | −$767M |
| 2014 | −$495M |
| 2016 | −$502M |
| 2018 | −$412M |
| 2020 | −$240M |
| 2022 | −$370M |

Source: Modern MBA, “How Western Union makes money from the unbanked”, published July 2023. Chart: https://modern-mba.com/case/western-union#chart-5 · Sources: https://modern-mba.com/case/western-union#sources


## Takeaways

1. **Every other transfer method assumes a bank account.** Wires, ACH, Zelle, Venmo, Cash App, PayPal and Wise are all account-to-account, and the first four are **US-only**. If the sender has no account, or the recipient has none, or banking where they live is unreliable, or the money is needed today, none of them work.
2. **The customer is the migrant worker, and the exclusion is deliberate.** Banks decline them for the same overlapping reasons: too little money on hand, volatile job-to-job employment, remote worksites, no way to reach a branch in business hours, language barriers, missing documentation — or simple distrust of anything but cash in a pocket.
3. **What Western Union offers instead is almost aggressively simple.** Walk in with **$1 to $50,000** in cash, send it anywhere in the world, and the recipient collects it in **minutes** with an ID and a **10-digit number**. No application, no account, no week-long hold. Money can reach every country on earth **except North Korea and Iran**.
4. **The scale only works because it is not owned.** Western Union has around **550,000** agent locations, up from **300,000** a decade earlier. Its **60,000** US locations exceed the branches of **Wells Fargo, Chase, Citibank, Capital One and Bank of America combined** — and the US is only about **10%** of the network. There are **twice as many Western Union locations in Africa as there are McDonald's and Subway in North America.**
5. **Agents are existing shops, which is the whole trick.** Supermarkets like Kroger, chains like 7-Eleven, Walmart and Dollar General, and thousands of independents — ethnic grocers, post offices, liquor stores, check cashers, gas stations, bodegas, notaries, tax preparers, insurance agencies. They already handle cash, already have a till, and already open **nights and weekends** when banks do not.
6. **For the shop it is free upside; for Western Union it is free reach.** The agent gets supplemental revenue, cross-sell and footfall against fixed costs they are already carrying. Western Union gets physical presence, local credibility and around-the-clock coverage with **no land, no labor and no fixed cost** — and because agents do not depend on it for their primary income, saturation is not a concern.
7. **Underneath, it is a settlement network with agents as nodes.** Each transfer is one sender, one recipient, one amount and two agents. Western Union sits in the middle running the engine that quotes the fee and rate at one end and instructs the payout at the other. Every additional agent adds a node and strengthens every path through it.
8. **Corridors decide the pricing.** A corridor is the flow between two specific countries, and its popularity follows immigration, diaspora maturity and the wage gap. **US to Mexico is the largest in the world at over $50 billion a year**; **India is the largest receiving market at over $87 billion.** The busier a corridor, the more competition and the lower the price — and the thinner it is, the more Western Union can charge for being one of the few networks that runs it.
9. **The real moat is regulatory, not physical.** Compliance and approval in **over 200 countries and territories**, each with its own framework for acting as a quasi-bank, plus brand recognition and **150 million customers'** trust. Over **90% of payments to India settle in real time**, which is infrastructure, not software.
10. **It reaches customers before they even leave.** Western Union tracks diaspora movement — North African neighbourhoods in Paris, the growing Jamaican community in Philadelphia, the emerging Haitian population in Indianapolis — and partners with governments upstream. **Every Filipino leaving for work abroad receives a Western Union pamphlet with their visa and work permit.**
11. **There is a float business hiding inside it.** Transfers not yet collected and money orders not yet cashed are invested in short-term, highly rated corporate and municipal bonds. Western Union liquidates to settle when the recipient turns up — and keeps the gains in the meantime, exactly as a bank does with deposits.
12. **Every operating metric has risen and revenue has not.** Transfers went from **150 million** in 2006 to **268 million** in 2016 to over **300 million** in 2021, and principal from **$53 billion** to **$80 billion** to **$96 billion**. Consumer-to-consumer revenue peaked at **$4.6 billion in 2011 and 2012** and was **$4.0 billion** by 2022.
13. **Pricing power is what broke.** In 2006 the average transfer carried **7%, or $25.03**, in fees and exchange margin. That fell to about **$20** in the 2010s and **under $15** in the 2020s, as PayPal, Wise and Venmo took the higher-value account-to-account business the company could no longer defend. Western Union cut fees and pushed **exchange margin from $654M in 2006 to $1.49B by 2016** to compensate.
14. **The agents absorbed part of the squeeze.** Commission has held near **35% of revenue** but fallen per transfer: in 2006 an agent pair split **$9.72** of a **$25.03** charge and Western Union kept **$15.31**. Agents now take about **2%** against **3%** then — on an average transfer that has itself fallen from nearly **$400** in the 2000s to **under $300**.
15. **Leadership's answer for sixteen years was buybacks.** Western Union spent an average of **$575 million a year** repurchasing stock — **$9.2 billion** since 2006 — and did it with **borrowed money**, because using operating cash would have defeated the point of flattering the numbers.
16. **The company only started measuring its customers in 2022.** When it did, it found **over 50% annual churn**: about **30%** who only ever needed one transfer for an emergency, and **20% who graduate** — settle, open a bank account, go digital and never come back. The new plan is to keep that 20% by becoming their bank, which means persuading people who trust cash to trust a phone. Experiments in Poland and Romania pay recipients **an extra $10** to take the money digitally.

## Common questions

### How does Western Union make money?

Three ways. Transaction fees and exchange rate margins charged to the sender on every transfer, which is the bulk of it; commission-sharing arrangements with the agents who actually handle the cash; and float, since transfers not yet collected and money orders not yet cashed are invested in short-term corporate and municipal bonds until someone turns up to claim them. In 2006 the average transfer carried about 7% — $25.03 — of which agents took $9.72 and Western Union kept $15.31. That average charge is now under $15.

### Why is Western Union so expensive?

Because of what it does that nothing else does: hand physical cash to someone with no bank account, in minutes, almost anywhere on earth. Pricing follows the corridor rather than a rate card — the US to Mexico route moves over $50 billion a year and is fiercely competitive, so it is cheap, while a thin route like Afghanistan to Taiwan carries a large premium because few networks run it at all. It has actually got cheaper over time, from around 7% of a transfer in 2006 to roughly 4% today, though exchange margins remain unfavourable and fees are not capped the way Wise and PayPal cap theirs.

### How many Western Union locations are there?

Around 550,000 agent locations worldwide, up from about 300,000 a decade earlier. Roughly 60,000 are in the United States, which is more than the combined branch networks of Wells Fargo, Chase, Citibank, Capital One and Bank of America — and the US accounts for only about a tenth of the total. There are twice as many Western Union locations in Africa as there are McDonald's and Subway restaurants in North America. Money can be sent to every country except North Korea and Iran.

### What is a Western Union agent?

An existing business that offers Western Union services alongside its own. Large chains like Kroger, 7-Eleven, Walmart and Dollar General are agents, but so are ethnic grocers, post offices, liquor stores, check cashers, gas stations, bodegas, notaries, tax preparers and insurance agencies. They already handle cash and often open nights and weekends. Western Union provides the settlement engine and training and pays commission on each transfer, which means it gets physical presence and local trust with no land, no staff and no fixed cost.

### Who uses Western Union?

Predominantly migrant workers sending part of their earnings home, plus anyone outside the banking system who needs cash moved immediately. Banks decline these customers for overlapping reasons: small balances, job-to-job employment, remote worksites, no ability to reach a branch during business hours, language barriers, or missing documentation. Sending markets are wealthy countries short of labour — the US, UK, Germany, Italy, Singapore, Norway, the Netherlands, the UAE. Receiving markets are the Philippines, Romania, Poland, Mexico, India, Pakistan and Bangladesh.

### Is Western Union dying?

Its pricing power is, but the operating business is not. Transfers rose from 150 million in 2006 to over 300 million in 2021, and principal moved from $53 billion to $96 billion, while consumer-to-consumer revenue peaked at $4.6 billion in 2011 and slid to $4.0 billion by 2022. PayPal, Wise and Venmo took the higher-value account-to-account business, forcing fees down. It remains a strong cash business with double-digit operating and net margins — carrying substantial debt from $9.2 billion of share buybacks.

### What is Western Union's new strategy?

To keep the customers it used to lose. Analysis begun in 2022 found over 50% annual churn, of which about 20% are people who settle, open bank accounts and move into the financial system — customers Western Union was a stepping stone for. The plan is a hybrid of retail cash and digital banking: a debit card linked to a mobile wallet, domestic peer-to-peer transfers and bill pay, so the company can take a small margin on everyday spending at both ends of a corridor rather than one large slice on a single transfer. It hinges on convincing people who trust cash to trust a balance on a phone.

## Discussion

- Western Union's network exists because banks decided these customers were not worth serving. Is that a market failure, a business opportunity, or both at once?
- The agent model carries no land, no labor and no fixed cost. What does the company actually own, and how defensible is it?
- Pricing collapsed from $25 a transfer to under $15 while volume kept rising. Which of those two lines should a board have been managing to?
- $9.2 billion of buybacks funded by debt, over sixteen years, on a business with no growth story. Who was that for?
- The 20% of customers who leave each year do so because they no longer need Western Union. Is retaining them a service or a trap?

## Sources

Revenue by business line, transaction counts, principal transferred, agent commission payouts, average fee and foreign exchange margin per transfer, location counts and share repurchase totals from The Western Union Company annual reports and 10-K filings, 2006 through 2022; corridor volumes and remittance flows from published industry data; executive commentary on customer churn and the digital strategy from company interviews and earnings calls

---

From [Modern MBA](https://modern-mba.com/). Read this case in full at [https://modern-mba.com/case/western-union](https://modern-mba.com/case/western-union), or watch the episode at https://www.youtube.com/watch?v=29nSycLw_5A.