Digital is Western Union's primary driver (WU)

Western Union RevenueBII

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Western Union’s Q2 2016 results were impacted by global political and economic instability and currency fluctuation.

But the firm’s overall consumer-to-consumer (C2C) revenue grew by 2% year-over-year on a constant currency basis in the quarter, largely driven by digital. And digital will become an increasingly important driver as geopolitical tensions continue to impact the firm’s other segments.  

Gains in digital revenue and transactions are outpacing Western Union’s overall growth rates.

  • Digital is driving Western Union’s growth. C2C revenue from Westernunion.com grew by 20% on a constant-currency basis, compared to just 2% C2C growth overall. That segment, which now comprises 8% of the firm’s total revenue, saw a 25% spike in transactions, whereas overall transactions grew by just 3%.
  • The US, one of Western Union’s strongest and most stable segments, illustrates the importance of digital. The firm’s US-originated business grew by 8% in the quarter. And digital transactions grew by 27% YoY in the US — higher than the average — with 60% of total transactions coming from mobile. The popularity of digital in a key market could have helped drive up US growth, and could serve as a benchmark for the impact that digital services could have in segments to which Western Union is looking to accelerate its growth.

Continuing investment in digital will be expensive in the short-term, but ongoing growth is a good sign for the firm’s ability to stay competitive in the remittance space. The firm continues to invest heavily in technology infrastructure, which could increase operational expenses. But the firm’s strong digital gains indicate that high investment will pay off in dividends, particularly in the current economic climate. And increased competition from digital providers, which attempt to attract customers through accessible platforms and low fees and could be particularly attractive in unstable economies, will only emphasize digital’s importance moving forward.

Every year, migrants send hundreds of billions of dollars worth of remittances back to friends and family in their home country. And there’s a massive industry that facilitates these payments — and has for more than a century.

The legacy remittance industry has been long dominated by cash, which requires physical locations where customers can hand over or pick up money. Building out those retail networks is a huge investment. It’s left just a few players, called Money Transfer Operators (MTOs), controlling a bulk of the industry.

But these companies’ comfortable hold on the industry is now being challenged by digital remittance startups. Digital-first remittance companies are competing on fees and usability, and capitalizing on the way people’s expectations have changed with the advent of digital and mobile channels.

Evan Bakker, research analyst for BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on digital remittance that sizes the total remittance market, company-specific market share, digital’s market share, and digital’s growth at major remittance firms. It also assesses how disruptive digital startups have been by comparing their fees with market leaders, and by juxtaposing their business models with those of legacy companies.

Here are some of the key takeaways:

  • Digital’s share of the global remittance industry is still fairly small at 6% — but growth is extremely fast at digital-first startups and legacy companies.
  • Fourteen year-old Xoom makes more revenue from electronic channels than 75 year-old MoneyGram, the second-largest remittance company in the world.
  • Startups are undercutting incumbents’ fees in certain corridors; however, legacy firms have matched prices in many major corridors.
  • Legacy firms’ businesses are already responding to the threats posed by digital by lowering fees and adjusting business strategies. However, they face lower margins if they continue to compete with startups on pricing.

In full, the report:

  • Sizes the remittance market and calculates major remittance companies’ market share.
  • Estimates digital’s share of the market vs. cash.
  • Quantifies digital’s impact at remittance startups and legacy firms.
  • Breaks down the business models employed by each type of remittance company, and determines which ones are in a better position for growth.
  • Compares transfer fees in various corridors to assess the competitiveness of each firm.
  • Explores other platforms that could completely upend the industry from the outside.
  • Determines how legacy remittance companies will fare in the digital age – the answer may surprise you.

To get your copy of this invaluable guide, choose one of these options:

  1. Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP
  2. Purchase the report and download it immediately from our research store. >> BUY THE REPORT

The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of digital remittance.


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Digital is Western Union's primary driver (WU)
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