MoneyGram International, Inc. MGI is witnessing higher customer adoption of its digital platform, which drives strong business growth. This upside can be attributed to the company’s digital channel named MoneyGram Online (MGO).
The online channel spurred 53% year-over-year growth in cross-border transactions during May. Revenues on this platform were up 60%.
Customer-Friendly Platform Attracts Usage
MoneyGram’s online services are in high demand because of its ease of use via the MoneyGram mobile app. It enables fund transfer on a real-time basis. This convenience and speed in turn lead to greater customer retention. MoneyGram’s digital suite is therefore growing at a breakneck speed.
Monthly Active Users, which determine the user traffic on the company’s mobile app, have been growing for the past many months. MoneyGram’s partnership with Visa, which helps customers send money via Visa Direct, a real-time push payments platform, aided cross- border transactions.
Digital Platform’s Increasing Contribution
At the end of the first quarter of 2021, digital transactions accounted for 32% of all money transfer transactions, approximately double the percentage at the start of 2020. If this growth is intact, then digital business will cross 50% of all money transfer transactions in 2024.
The company began laying the groundwork for its digital transformation five years ago to embrace the rapid changes brought about by the integration of technology in the remittance industry.
The remittance space was invaded by many fintech players with the likes of TransferWise, Green Dot Corporation GDOT, WorldRemit, PayPal Holdings Inc. PYPL and many others jostling for space.
The company’s revenues declined every year from 2017 to 2020 and the only way to stay afloat in this rapidly-changing remittance was to change the way it maintained its traditional business set-up. Its close peer Western Union Co. WU is also facing the same rivalry and has been chasing technological investments over time to lead the pack.
Of its agent locations in 200 plus countries and territories, 94 are now digitally enabled. The transition from once solely brick-and-mortar format to a hybrid combo of online and brick-and-mortar is slowly paying off. An amalgamation of its cash and digital capabilities will make it stand out from the queue of digital-only competitors who are unable to serve a significant portion of the remittance market that relies on cash alone.
After remaining under pressure, revenues are finally showing up and already grew 6.5% in the first quarter of 2021. We now expect a trend reversal in the top line too.
Through its digital business, MoneyGram is exploring uncharted geographies and continuously wooing a completely new customer base. Digital business is a key to customer wins and earning incremental profits.
Investment in mobile app and integrations with mobile wallets plus account deposit services will boost its digital business.
Other than its proprietary use, MoneygGram is monetizing its wide API-driven digital network by enabling other companies to access its leading global money transfer network. Called MoneyGram as a Service, the business provides a new revenue source and was launched in March this year.
The new business line represents a significant growth opportunity for MoneyGram as it enters a market estimated to be valued at $17 billion in 2024, seeing a CAGR of about 24% over the forecast period.
Year to date, the stock has rallied 259% compared with its industry’s growth of 9.4%.
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MoneyGram carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
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