Western Union Financial Services, Inc.
Western Union Financial Services, Inc.
Wholly Owned Subsidiary of First Data Corporation
Incorporated: 1851 as The New York and Mississippi Valley Printing Telegraph Company
Sales: $2.7 billion (2001)
NAIC: 522320 Financial Transactions Processing, Reserve, and Clearing House Activities; 517110 Wired Telecommunications Carriers
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.
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.
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.
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 anticompetitive 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.
- Western Union’s predecessor, The New York and Mississippi Valley Printing Telegraph Company, is founded.
- Western Union introduces the first stock ticker.
- Western Union introduces the concept of wiring money.
- A transcontinental microwave radio beam system replaces telegraph poles and wires.
- Western Union becomes the first company with five satellites in orbit.
- Western Union declares bankruptcy, and is acquired by First Data Corporation.
- Western Union’s money-transfer network ranks as the largest in the world.
- Westernunion.com is launched.
CheckFree Corporation; MoneyGram Payment Systems, Inc.; United States Postal Service.
Ankomah, Baffour, “The Money Transfer Revolution,” African Business, October 1995, p. 28.
Barthel, Matt, “1st Data Agrees to Sell a Money-Transfer Business If It Wins Western Union,” American Banker, August 22, 1994, p. 14.
“Bumiputra-Commerce Western Union Tie Up,” New Straits Times, March 13, 2001.
Fickenscher, Lisa, “Western Union Beefs Up in Mexico, Signing 10-Year Deal with Retailer,” American Banker, January 30, 1996, p. 17.
Levin, Gary, “Western Union Not Fading into Sunset; New Services Are Added As Telegrams Drop,” Advertising Age, April 27, 1992, p. 54.
Malhotra, Priya, “More E-Billing at Western Union,” American Banker, July 29, 2002, p. 23.
Sileo, Olia, “Marking 125 Years of Wiring Money,” The Record, January 31, 1997, p. B1.
“Uzbekistan: Western Union Opens in Uzbekistan,” IPR Strategic Business Information Database, February 24, 2002, p. 3.
“Western Union Buys Commerce Group,” Cardline, June 17, 2002, p. 1.
“Western Union Cash Transfer Unit to Open Between U.S. and Russia,” Travel Weekly, May 25, 1992, p. E18.
—Jeffrey L. Covell
Western Union Corporation
WESTERN UNION CORPORATION
The first electromagnetic communication that revolutionized the world's economic and social life was transmitted on May 24, 1844, by Samuel Finley Breese Morse (1791–1872). At the Capitol building in Washington D.C., in the presence of Dolly Madison, Henry Clay, and other officials, Morse tapped out his famous message, "What hath God wrought?" This telegraphed message, transmitted in Morse Code, traveled 40 miles to a Baltimore, Maryland, train depot and was received in seconds by Alfred Vail (1807–1859), the financier of Morse's telegraph. The era of telecommunication had begun.
When Congress declined Morse's proposal for the government to purchase his telegraph patent, Morse and several partners formed the Magnetic Telegraph Company. Competition among telegraph rivals across the country was fierce. Prepared to compete with 50 other telegraph companies in operation throughout the United States, the New York and Mississippi Valley Telegraph Company (NYMVTC) was formed on April 8, 1851, in Rochester, New York. Five years later the growing NYMVTC was renamed the Western Union Telegraph Company. In 1857 Morse and his Magnetic Telegraph Company teamed up with businessman and financier Cyrus Field (1819–1892) in a project to lay a transatlantic telegraph cable. In the meantime, Western Union had begun the almost impossible task of stringing the first transcontinental telegraph poles to enable coast-to-coast communication. This rapid mode of communication heralded the end of the U.S. government's pony express service. It also saw the end of Morse's Magnetic Telegraph Company. In 1866 Morse recognized that his company could not compete against such a big rival, and in 1866 the Magnetic Telegraph Company merged with Western Union Telegraph Company. Along with the introduction of the commercial telegraphic machine, Western Union was successful in developing its own transatlantic cable technology. The company was well on its way to becoming the fastest messenger service in the country.
The social and economic impact of the telegraph resounded across the country. As the telegraph lines followed the westward expansion of the railroad, ordinary people paid the expensive fees for communicating quickly across vast regions. Big business and governments experienced the advantages of communication as new services were offered to keep pace with the changing needs of the American people. After Western Union moved its headquarters from Rochester to New York City in 1866, it introduced stock tickers as a method to speed New York Stock Exchange quotes to brokerage firms. One of Western Union's key services was the Money Transfer. Introduced in 1871, this service was still used in the late 1990s.
Time was not yet standardized across the country, so in 1870 Western Union developed its own time service. The nation's tallest building in 1877, built by Western Union, had a time ball at the top, which dropped at noon on a signal telegraphed from the U.S. Naval Observatory. The need for a standardized time schedule was becoming apparent for safety factors and to avoid confusion as communication across the country became more immediate. Generally acknowledged by the public as the most reliable regulation of time, the official start of Standard Railway Time was signaled in 1883 from the descent of the Western Union time ball. With clocks that rang school bells, blew factory whistles, and flashed signal lights Western Union became known as "The Nation's Time Keeper."
The technology of communication advanced rapidly. Western Union began using radiotelegraph to reach people on ships. Telegrams became extremely popular. The key and sounder had been replaced by the teletypewriter, only to be replaced by Western Union's introduction of the telex, a direct dial customer-tocustomer teleprinter service in 1958. The telex would go on to serve as Western Union's second chief source of revenue. Mailgram messages began in 1970, becoming very popular for social and commercial use due to overnight delivery. The operation of the first domestic satellite communication system, Westar, was launched in 1974. By 1982 Western Union became the first U.S. company to have five satellites in orbit. For many years Western Union up-linked messages, data, and graphics to Westar satellites from major publishers, broadcasters, and corporations, and delivered the information across the country at the speed of light.
As early as the American Civil War (1861–1865) Western Union was contracted by the U.S. government to provide direct messaging to the White House communications room. Services included the filling of special money transfers, ensuring messaging needs were met and delivered to the troops during wartime, and delivering military orders of condolence for the armed forces. The services provided by Western Union to the government grew widely in the years following the Civil War. The company was chosen to provide communication for the Department of Defense, linking agency offices and supplying microwave communications for defense and intelligence agencies. A Western Union network connected the Federal Reserve member banks to a central computer center. Through Western Unions networks, law enforcement agencies exchanged data, and the Federal Aviation Administration provided flight and weather information to pilots.
Generations of people associated Western Union with hand delivered messages announcing births, deaths, homecomings, and even proposals of marriage. Western Union's telex business experienced success as the company continued to focus on other innovative business ideas. By the 1960s, however, telegraph use was waning as the telephone became the preferred method of communication. When it became cheaper to send data by telephone, the telex business began to suffer. Western Union was on the decline.
Since 1987 Western Union experienced many corporate and business changes. Despite its many past successes, the company found itself on the verge of bankruptcy in the early 1990s. On April 18, 1991, Western Union Corporation shareholders changed the name of the company to the New Valley Corporation in an effort to distance the failing enterprise from its successful subsidiary, Western Union Financial Services. New Valley assumed existing debts, but these soon skyrocketed to $800 million. In 1994 a bankrupt New Valley sold Western Union Financial Services Incorporated, all the Western Union money transfer trademarks, and trade names associated with the Western Union name, totaling $1.19 million. Utilizing this capital, New Valley continued to function, posting significant financial losses well into the late 1990s.
See also: Samuel Finley Breese Morse, Standardization of Time, Telegraph, Utilities Industry, Westward Expansion
Brewer, A.R. Western Union Telegraph Company, 1851–1901. New York: The Company, 1901.
Gallagher, Edward A. Getting the Message Across; The Story of Western Union. New York: Newcomen Society in North America, 1971.
International Directory of Company Histories, vol. 17. Farmington Hills, MI: Gale Group, 1988–1998, s.v. "New Valley Corporation."
McFall, Russell W. Making History by Responding to its Forces. New York: Newcomen Society in North America, 1971.
Rivise, Maurice Joseph. Inside Western Union. New York: Sterling Pub. Co., 1950.
Western Union Telegraph Company
WESTERN UNION TELEGRAPH COMPANY
WESTERN UNION TELEGRAPH COMPANY. The Western Union Telegraph Company resulted from the 1856 merger of Hiram Sibley's New York and Mississippi Valley Printing Telegraph Company and lines controlled by New York businessman Ezra Cornell. At Cornell's insistence, the newly formed venture was named Western Union to represent the consolidation of western telegraph lines.
During its first years, Western Union expanded rapidly by systematically acquiring its competitors. By 1861 it had completed the first transcontinental telegraph line, uniting the Union and providing rapid communication during the Civil War. The system proved so efficient that it prompted the U.S. government to discontinue the historic Pony Express. The company soon began experimenting with new technologies. In 1866 it introduced the first stock ticker, developed by then-employee Thomas Edison, and in 1871 it introduced money transfer as a complement to its existing telegraph business.
Having first declined to purchase the patent for Alexander Graham Bell's telephone, Western Union subsequently purchased the patents of Bell's competitor Elisha Gray. Western Union's foray into the telephone business proved unsuccessful, however. By 1879, faced with stiff competition from Bell, Western Union agreed to exit the industry. In return it received the promise that Bell would no longer operate a telegraph business.
By the early 1900s, the telephone industry had grown dramatically and the telegraph giant found itself a subsidiary of the American Telephone and Telegraph Company, which purchased Western Union in 1909. The U.S. government, however, fearing a monopoly, forced the sale of Western Union just four years later.
For many years the company continued to be an innovator in the communications industry. In 1914 it introduced the first consumer charge card; in 1924, it was one of several companies to develop a high-speed facsimile system. Ironically, facsimile services would eventually become a contributing factor in the decline of the telegraph industry.
Over the next several decades Western Union revenues began to fall. Fierce competition and the development of more efficient technologies for message delivery led to the decline of the telegram. Determined to remain a player in the telecommunications industry, Western Union diversified into Telex in 1958 and launched the country's first domestic communications satellite, Westar I, in 1974.
By 1984 the company was facing financial crisis. Burdened with massive debt, it sold its satellite interests to Hughes Aircraft in 1988 while its electronic mail and Telex services were bought by AT&T in 1990. By 1991, with the threat of bankruptcy looming, Western Union's board of directors voted to change the company's name to New Valley Corp, a reference to its predecessor, the New York and Mississippi Valley Printing Telegraph Company.
The effort to protect its historic name and preserve the reputation of its lucrative money transfer business did little to solve the company's financial woes, and in 1994 its still-profitable businesses were sold to First Financial Management Corporation (FFMC) under the name Western Union Financial Services. Just one year later, FFMC merged with electronic commerce giant First Data Corporation.
Today Western Union is primarily a financial services company and operates as a subsidiary of First Data. Money transfer, once an ancillary business, has become its chief source of revenue. Although Western Union still runs a version of its historic telegram service, telegrams now account for less than 1 percent of its business.
Oslin, George P. The Story of Telecommunications. Macon, Ga.: Mercer University Press, 1992.