Update: Nov. 4, 2021: Western Union reported third-quarter softness in the U.S. retail money transfer business during an earnings conference call with analysts Tuesday, blaming a slowdown in the economic recovery and sluggish migrant labor demand. The company's revenue edged up 2% to $1.29 billion and net income rose 2% to $233 million.
On questioning from analysts, Chief Financial Officer Raj Agrawal noted that the company has engaged in "price optimization" to maximize cash flow in that segment because it "has been in decline for several years" and is now just 4% of revenue.
Still, he carved out the new Walmart situation, saying "we're seeing some good traction there."“The business is continuing to gain traction every month since we’ve launched it and we think it’s going to be a bigger contributor next year,” Agrawal said during the call, answering a question about Walmart.
Moneygram executives on Friday blamed discounting by rival Western Union at Walmart stores for a drop in its money transfer revenue as it competed with lower pricing.
In a call with analysts, executives at Dallas-based Moneygram said about half of the decline in its walk-in revenue during the quarter resulted from the company trying to remain competitive with discounting by Western Union at the stores, especially on certain cross-border services.
Western Union rolled out its services at Walmart, including the money transfer, earlier this year, after announcing in May that they would be available at 4,700 Walmart stores. Competition has also intensified in the money transfer arena with the arrival of fintechs seeking to simplify such cross-border payments with new digital tools.
Moneygram CEO Alex Holmes called some of the pricing moves for foreign exchange “costly” because trading in foreign exchange rates in connection with the money transfers is not free. “That's taken out substantial chunks of revenue,” he said during the call, referring to it as “disappointing.”
Moneygram's overall revenue for the third quarter declined 3.6 percent to $319.6 million compared to the quarter last year, according to the company's earnings release.
“The transition with Walmart continues to be a little bit in flux,” Holmes said. "Given the competitive nature of what Western Union actually brought in, in terms of no FX rates on several countries, which I still don't quite know why they're doing that — that's taken out substantial chunks of revenue.”
Holmes went on to say that reducing prices to match those of Western Union has helped the company retain the “vast majority” of customers since the rivalry spun up in the second quarter of the year. Still, he noted the impact of the pricing war was “bigger” in the third quarter than in the second quarter and suggested the impact will continue in the fourth quarter.
A representative for Western Union wasn’t immediately available to comment on the competition. Perhaps representatives for that company will have input during their own earnings conference call tomorrow.