Digital Transactions Authoritative, insightful and timely information for payments professionals
By Jim Daly
Leading wire-transfer providers The Western Union Co. and MoneyGram International Inc. both reported big growth in their online businesses in the first quarter while merchant acquirer Heartland Payment Systems Inc. posted strong increases in charge volume.
• They’re still a small portion of its overall business, but electronic channels are generating some of Western Union’s fastest-growing revenues. Englewood, Colo.-based Western Union reported late Thursday that WesternUnion.com posted a 25% increase in consumer-to-consumer transactions during the first quarter. Most of that volume came from the U.S., and nearly half of it originated on mobile devices.
WesternUnion.com is available in only 25 countries compared with about 200 countries and territories that have Western Union agents—500,000 in all. But president and chief executive Hikmet Ersek told analysts that the company’s online-based services will be moving into many more countries. “It’s just the beginning of the game, actually,” he said.
In all, Western Union’s electronic-channels revenues, including Westernunion.com, account-based money transfers originated through banks, and mobile money transfers grew 17% in the first quarter and now generate 7% of total revenues.
While Western Union agents remain the core revenue generator, the company is exploring leading-edge payment options. Digital-currency services provider Ripple Labs disclosed this week that it will provide “infrastructure” to test real-time settlements with Western Union. Neither company provided details. In response to an analyst’s question about the test, however, Ersek said, “Our goal is to find new customer segments … we are always looking for other opportunities to upgrade our platform.”
Against the downward pull of a strong U.S. dollar, Western Union’s overall revenues declined 2% in the quarter to $1.32 billion from $1.35 billion a year earlier, but were up 4% on a constant-currency basis. Net income grew less than 1% to $203.9 million, though earnings per share rose 5%.
• Dallas-based MoneyGram is still recovering from Wal-Mart Stores Inc.’s 2014 switch of most of its store-to-store domestic money-transfer business to Euronet Worldwide Inc.’s Ria subsidiary. Wal-Mart, MoneyGram’s largest agent, accounted for 27% of MoneyGram’s fee and investment revenue in 2013 and 22% in 2014. MoneyGram reported Friday that U.S.-to-U.S. transactions plunged 37% in 2015’s first quarter, an improvement from the 40% decline in 2014’s fourth quarter.
MoneyGram’s total first-quarter revenues fell 12%—8% on a constant-currency basis—to $330.6 million from $374.9 million a year earlier. The company reported a loss of $72 million compared with net income of $39 million in 2014’s first quarter.
Like Western Union, MoneyGram took some comfort from strong growth in its online and self-service channels in the first quarter. Self-service transactions increased 55% and now represent 13% of money-transfer transactions. MoneyGram, which has 350,000 agent locations worldwide, has rolled out self-service kiosks at CVS pharmacy stores in the U.S. and PrivatBank branches in Ukraine. Self-service revenues grew 45% over the prior year, accounting for 11% of money-transfer revenues. On an annualized basis, self-service channels will generate more than $125 million in revenues, MoneyGram said.
Meanwhile, MoneyGram Online transactions increased 21% and online revenues grew 11%.
MoneyGram has instituted lower pricing for U.S. domestic money transfers, which along the Wal-Mart loss reduced revenue and cash flow. “However, the resilience of our U.S. outbound and non-U.S. sends along with our investments in emerging markets and innovative new technologies are successfully positioning MoneyGram for a return to double-digit growth in the fourth quarter,” Pamela H. Patsley, MoneyGram's chairman and chief executive, said in a statement.
• Meanwhile, the big merchant acquirer Heartland Payment Systems Inc. reported Friday that first-quarter volume in its small and mid-sized merchant portfolio grew 16% to $20.8 billion from $18 billion a year earlier. Net revenues jumped 22% to $190.3 million and net income rose 10% to $17.2 million.
Princeton, N.J.-based Heartland said its core Visa and MasterCard volume increased 11% in the quarter. Non-card revenues, including business from Heartland’s growing payroll services, grew 49%.
