MoneyGram and Western Union, the two leading legacy remittance players, reported their Q3 2017 earnings late last week. Though overall performance was different, digital was an ongoing bright spot for both firms.
- MoneyGram: MoneyGram has spent the better part of 2017 tied up in a contested potential $1.2 billion acquisition by China-based Ant Financial, which has faced challenges from competing bidders and difficulty garnering government approval. That could have hurt the firm’s overall performance, which declined in Q3 2017. But despite overall performance, customer adds propelled the firm’s digital segment to 6% revenue growth, helping it meet its goal of 15% overall revenue from digital, which was set multiple quarters ago.
- Western Union: The digital segment of Western Union’s consumer-to-consumer (C2C) revenue grew by 23% annually on a constant currency basis, outpacing the company’s 1% overall C2C growth, as well as its 3% total revenue increase. More interestingly, though, is that the digital segment is catalyzing new business rather than supplanting old offerings: up to 80% of Westernunion.com customers are new, pointing to the value of digital in expanding legacy firms’ bases.
Resounding digital performance from legacy firms could be a threat to digital players.The growing popularity of digital-first remittance firms makes sense, because lower fees and increased convenience could make them compelling to customers. But Western Union and MoneyGram’s results show that their digital offerings are strong. And their ability to bring in largely new consumers, rather than only converting existing users to new channels, indicates that they’re competing effectively with digital players and continuing to grab some of their potential market.
This, combined with the firms’ existing dominance, could make it harder for competing firms to break into the market, and should push digital-first players to find ways to outpace legacy providers’ digital offerings.
- Quantifies how large the remittance market currently is.
- Discusses what some of the barriers to growth have been for the remittance industry in recent years.
- Identifies what factors are going to lead to continued growth going forward.
- Considers ways digital-first startups have begun to disrupt traditional remittance companies and bring down fees.
- Breaks down what legacy firms are doing to hold off these challengers, while also evolving with the changing technological trends occurring globally.
- Explores what firms in the industry will have to do going forward in order to avoid being outperformed in an industry that is becoming increasingly saturated.