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Western Union Co. WU has disclosed that it witnessed a significant surge in its consumer-to-consumer (C2C) business for the month of May owing to the gradual reopening of economy amid easing of lockdown restrictions.
Due to the coronavirus outbreak, this world leader in money remittance witnessed a nearly 30% contraction in business volumes, both in late March and early April.
However, the rate of decline in Western Union’s business started moderating in mid-April, led by an improvement in retail channel and a significant acceleration in digital growth. The same trend continued in May with digital transaction growth for the month reaching its peak in a decade.
Western Union built its digital money transfer platform on the back of massive investments made in recent years, which bore fruits amid the prevalent pandemic that see customers preferring digital mode of money transfers over physical means.
Western Union’s digital money transfer business was already generated more than $600 million of revenues in 2019. It continued its impressive run with 22% revenue growth recorded in the first quarter of 2020, which represented 16% of the company’s consumer to consumer (C2C) segmental revenues.
westernunion.com is becoming increasingly integral to the company’s business, accounting for nearly 15% of total money transfer revenues in 2019, up from 6% in 2015. In digital solutions, the company expects revenue growth to be aided by more business vertical additions. It consistently expands its existing high-growth areas, such as education payments while also leveraging its EDGE platform and digital self-service offerings.
The company was very proactive with its services during the COVID-19 breakout. For example, it launched Westernunion.com in additional countries, enabling its customers to send funds digitally across the world from more than 75 countries.
The company introduced a digital location service to 10 countries that helped customers complete digital transactions to assist them to make voice and video calls. Further, it extended its payout service by working with agents to provide home delivery of money transfers in select countries where curfews are restricting the movement of its receivers.
Western Union also fast-tracked the expansion of its real-time payout capabilities. Over the past many years, the company diversified its payout network to include more than four billion accounts and wallets in excess of 100 countries. Recent enhancements of its payout ecosystem now enable customers to carry out remittances to bank accounts and wallets across 50 countries within minutes.
Customers prefer using a trusted brand when switching to digital options, which may be one of the prime reasons for growth in the company’s digital channels. It witnessed a combination of channel shifts by some existing consumers and strong customer wins.
Given the company’s vast global reach, wide agent network and a solid capital position, it remains on a firmer footing to compete in the large and fragmented cross-border payments and remittance market.
While the company is one of the largest players in the remittance market, estimated at $700 billion of annual principal, it captures only a small pie of the market share and therefore foresees boundless opportunities to tap into. The company also eyes a huge scope for growth within the cross-border payments market.
Per media sources, Western Union is offering to buy its rival MoneyGram International Inc. MGI. The deal will secure the company’s position in the remittance market, which is seeing an entry of new fintech players. This, in turn, will boost its competitive edge over its leading peers like PayPal Holdings, Inc. PYPL, Square, Inc. SQ, et al.
Western Union has a Zacks Rank #3 (Hold) and lost 13.93% year to date against its industry’s growth of 0.71%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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