The Money-Transfer Newbies Nip at the Incumbents’ Heels

Relative newcomers to the world of money transfers such as Remitly Inc., TransferWise Ltd., and WorldRemit Ltd., which specialize in end-to-end digital transactions, are nibbling away at the market share of agent-based leaders The Western Union Co. and MoneyGram International Inc., says a new report from research firm Aite Group LLC. 

Overall, the global money-transfer market, which is largely being driven by cross-border payments, was valued at $689.4 billion in 2018, according to figures from the Washington D.C.-based World Bank cited in the report. Boston-based Aite estimates cross-border remittances will grow to $739.2 billion by 2020. 

In 2018, Denver-based leader Western Union saw its share drop to 12.7%, down from 13.7% in 2015. During the same period, Dallas-based MoneyGram’s share declined to 5.3% from 6.4%, according to Aite’s “Cross-Border Remittances: Fuel for the Global Economy” report. The report by senior analyst Talie Baker tracks six global transfer firms and is the first of a two-part series on the money-transfer market.

Ria, a subsidiary of Leawood, Kan.-based Euronet Worldwide Inc. and a long-time rival of Western Union and MoneyGram, has surpassed MoneyGram, boosting its share to 6.4% in 2018 from 4.4.% in 2015. 

Among the upstarts, London-based TransferWise enjoyed the largest share gain, notching a 6.8% share in 2018, up from 1% in 2015. Seattle-based Remitly and WorldRemit, also based in London, brought up the rear among the newcomers, growing their respective shares during the same period but still logging under 1% of the global market, the report says. 

The combined gross transaction volume of the six providers totaled $222.8 billion in 2018 and accounted for 32% of global market share, Aite says. 

Besides losing market share, Western Union was the highest-cost provider in 2018, generating $15.50 in revenue per transaction, according to the report. MoneyGram was not far behind, generating an estimated $13.40 in revenue per transaction last year.

Among the digital challengers, Remitly boosted its revenue per transaction to $5 in 2018, up from $3 in 2015. In contrast, per-transaction revenue at TransferWise and WorldRemit remained flat from 2015 and 2018, never rising above $1. Even so, Aite expects them to be moving toward higher profit margins, albeit slowly, in the coming years.

A key driver of the global growth of remittances is immigrants working in wealthy countries who send money to their families back home in low- and middle-income countries. Remittances to such countries are expected to reach $550 billion in 2019, up from $529 billion last year, making money transfers to those countries their largest source of external financing, the World Bank says.

While the global remittance market remains robust, Aite says competition has intensified over the last decade, which is likely to continue contributing to lower margins for several of the top players in the near-term.

One possible option for stemming market-share erosion, the report says, is for the leading players to diversify their product offerings. Doing so can capture more share of their customers’ wallets and attract new customers. Plus, it can increase customer engagement and add services for unbanked consumers.