The fervor over the digital currency bitcoin has drawn interest from two of the world’s largest movers of money.
Western Union Co. (WU) and MoneyGram International Inc. (MGI) are studying ways their customers could use their services to send and receive money transfers denominated in bitcoins, the companies’ executives say.
While it is pretty much a no-brainer that Bitcoin would improve the efficiency of Western Union and Moneygram’s money transfer network it is almost equally obvious that Bitcoin doesn’t need either of them and that it can function as an independent third money transfer system entirely on its own.
I’ll grant that the weakest link in Bitcoin, at present, is its convertibility into a local currency. Having Western Union and Money Gram embrace the Bitcoin concept would be a great boost for Bitcoin as it would make the convertibility problem disappear in those locations served by the two companies.
But if Western Union and/or Moneygram were to embrace Bitcoin in the wrong way I think they would be opening a Pandora’s Box to their own end, however. As soon as the users of their system learn they are using Bitcoin to do the transfer then those customers (who most likely own cell phones) would simply buy their own Bitcoins and send them to their relatives directly. Thus, Western Union’s and Moneygram’s position as a middleman would be severely jeopardized by simple enlightenment and education of their customer base. While that end to their role as middlemen monopoly is inevitable (in my estimation) their endorsement, publicizing and use of Bitcoin in the wrong way would actually speed their demise.
But if they turned their locations into Bitcoin education centers for the purpose of training of persons in the use of Bitcoin and being a Cambio for the exchange of local currencies into Bitcoin then THAT, I think, would be viable and valuable in the long term. Western Union and Moneygram should consider becoming Bitcoin Cambios that exchange local currency for Bitcoin or vice-versa in their local offices. I also know there are ATM type machines that they use and those could be easily converted to also send Bitcoin. That service is badly needed by the Bitcoin community and is a field that is sure to grow
Converting Bitcoin to local currency is definitely the weakest link in the Bitcoin chain and if Western Union and Moneygram were to establish themselves as leaders in that area by becoming early adapters of Bitcoin then I would venture they might be able to remain in a profitable situation. Their profits would be limited by the ease of use of Bitcoin and the guaranteed competition in their offshore locations growing since anyone with local currency can agree to exchange it for Bitcoins without a license or even a structure. But if they were to get their brand associated with the Bitcoin brand and, at the same time, establish themselves as that Premier needed Cambio services then they might survive.