The U.S. Treasury’s U.S. Money Laundering Threat Assessment, published last December, says that many types of stored-value cards have the potential to become major avenues for money laundering, suggesting—although not saying explicitly—that stringent anti-money laundering regulations are in the offing for the card products.
Industry groups are preparing what amount to pre-emptive negotiations to keep the issue off the floor of Congress, hopefully minimizing potential regulations that could, in the view of many in the industry, cripple the business case for what bankers and other payments executives consider several promising new revenue streams. But prepaid-card executives are declining to speak publicly about the issue, hoping to keep public discussion about stored-valued cards “positive.”
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Last Thursday, the day First Data Corp. announced its reorganization, Western Union announced it was out of the telegram business.
We understand the logic. Who sends telegrams in a world of emails and instant messaging? And though the company doesn’t say so, it’s hardly likely that the telegram business, on which the company was founded in 1851–as the Mississippi Valley Printing Telegraph Company–was a profit center. Dropping the business just made sense for a global payments company that makes $4 billion a year.
Still, it’s a melancholy milestone, in observation of which we share with you our favorite Western Union story:
Life Magazine was doing a story about Cary Grant in the 1950s and, not knowing his age, sent him a telegram reading “How old Cary Grant?” Grant replied “Old Cary Grant fine. How you?” (Contact: Western Union, 303-967-6416)
Last week’s news that First Data Corp. will spin off its Western Union operations to First Data shareholders and create a company worth an estimated $20 billion is probably good news for Western Union. Noting that the parent company will be keeping its card processing, card services, and international business lines, observers were asking what had otherwise changed.
The answer: Nothing. “The bottom line for me is that this doesn’t change the realities, which are that even though they’re going to reconstitute what First Data will be, it doesn’t change the facts that Western Union, while it’s a good business, is facing increasing competition around the world, that the card business is struggling mightily, and that merchant processing is a commoditized business,” says Scott Kessler, who follows First Data for Standard & Poor’s.
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