Bank of Nova Scotia and Western Union Co. of Colorado have inked an agreement allowing Scotiabank to offer WU money transfers from Scotiabank’s Canadian branches.

The pilot program in 42 Scotiabank branches in British Columbia, the Prairies and Ontario was announced last month. Depending on the success of the program, the WU services will be available at the bank’s branches nationwide and online late in January. Thus far, says Daniel Diaz, WU’s vice president of corporate affairs, via e-mail: “Early results have been tracking as expected.”

It is a natural partnership for “Canada’s most international bank” and WU, which in 1851 built the U.S. telegraph network and started wiring money 20 years later. WU now has 320,000 agent locations in more than 200 countries.

According to Neal Oswald, a partner in PricewaterhouseCoopers LLP’s Advisory Services department, WU’s network complements Scotiabank’s: “Scotiabank has a footprint in Latin America and the Caribbean, but not in Europe and Asia.”

Gillian Riley, managing director, term deposits and day-to-day banking at Scotiabank, agrees. “By leveraging and tapping into Western Union’s network,” she says, “Scotiabank will be able to serve Canada’s multicultural communities better.”

Many in those communities regularly send money to family in their countries of origin: indeed, 85%-90% of Canadian wire transfers leave the country. WU’s network will give Scotiabank customers access through the bank to regions and communities that are not using banks, she says.

Diaz adds that, in addition to regular users such as new Canadians and immigrants supporting family or friends abroad, the service will benefit “the person with an urgent need to get money to someone” when sending a gift or paying for an unforeseen medical expense, for example. For the customer facing a tight financial deadline, WU is faster than traditional bank transfers. At the same time, its closed network is more secure than bank-supported alternatives such as e-mail money transfers.

The alliance also serves WU well. In the past decade, it has expanded its reach by acquiring Orlandi Valuta, a Los Angeles-based money-wiring firm with an extensive network in Mexico. It also acquired Vigo Remittance Corp., which was founded in New York to serve people wiring funds to Brazil. WU already has agreements with Banco Nacional de Mexico of Mexico City and Los Angeles-based California Commerce Bank that are similar to the one with Scotiabank. This past October, WU placed agents in Canadian Wal-Mart stores.

“The Western Union model works best when there are many agent locations conveniently located where people engage in commerce,” says Diaz. “We try to position our service in various classes of trade so that people can go where it’s convenient to them.”

According to Oswald, this marks a broad trend of mutually beneficial strategic alliances by Canadian banks. “They can’t be all things to all people,” he explains. “They don’t have the resources.”

Canadian banks cannot compete with the global giants that are now testing the Canadian market — the total assets of the Big Six banks barely reach the level of even one of the world’s biggest banks.

But some Canadian banks are extending their reach by building relationships with companies such as payment processor Moneris Solutions Corp. of Toronto and Mississauga, Ont.-based cheque-clearing house Symcor Inc. to provide services that are too expensive for the banks to offer through their own networks.

As Oswald notes, the agreement with WU is a model for this type of agreement as it allows Scotiabank to “achieve a global network without maintaining the corresponding banking network.”

That, he says, makes it easier to reach customers the bank could not otherwise serve.

As Oswald notes, such alliances are not likely to replace the key areas in which banks compete for customers, but it seems clear that they are likely to become more important as the global community becomes increasingly interconnected. IE