Cross-border payments player Western Union and rival Euronet Worldwide are both increasingly counting on their faster-growing digital services to fuel the expansion of their businesses.
The money transfer companies earn revenue from providing services that let consumers send money domestically and internationally.
While Western Union storefronts still account for about three-quarters of the company’s revenue, according to a fourth-quarter earnings presentation Tuesday, the digital business is growing faster. Revenue from the legacy in-person business declined 1% during the fourth-quarter, relative to the year-earlier period, while digital revenue, including online and mobile orders, rose 4%, the company’s Tuesday earnings press release said.
The Denver-based company reported fourth-quarter net income dropped about 50% to $127 million as revenue slumped 4% to $1.05 billion.
Nonetheless, one financial firm noted Western Union is making progress under the leadership of CEO Devin McGranahan, who took the company’s top post in late 2021.
The company recently “snapped five consecutive quarters of declines in branded digital revenues,” analysts at William Blair noted in a Feb. 5 note on remittance services.
Indeed fourth-quarter consumer money transfer transactions overall rose 5% over the prior quarter while branded digital transactions jumped 13%, according to the presentation.
Still, there’s plenty of room for more growth: Western Union is live with its next-generation digital app in just 12 countries out of the 200 countries where it does business, and has its digital wallet in only five. The app allows customers to place money transfer orders, while the digital wallet can direct funds to personal bank accounts and cards, depending on the country.
McGranahan explained how the digital wallet in particular fits into the company’s overall strategy as a tool for customer retention and a path to selling more services.
“While we still have a strong focus on growing our digital wallet, we're doing so more with a focus on our remittance business, and on driving retention with our digital remittance customers, by them having more of an account-based relationship,” the CEO said. He added that the company believes the wallet will drive more revenue from “ancillary products and services,” such as interchange fees, bill payment and from other services not available in its more traditional offerings.
At Euronet, where money transfer services constitute about a third of the company’s revenue, digital services are also becoming more important to that segment’s business. Its network reaches about 200 countries as well, touching about 4 billion bank accounts and about 2 billion digital wallets, the company said in a fourth-quarter earnings presentation on Wednesday.
“The new distribution channels are wallets because in the developing world, everybody's got a wallet now, and so we can drop money directly into 2 billion wallets,” Euronet CEO Michael Brown told analysts on a Wednesday webcast.
The Leawood, Kansas company’s fourth-quarter net income of $69.5 million was about flat with the year-ago period, even as revenue jumped 11% to $957.7 million, according to an earnings press release.
For the quarter, Euronet’s direct-to-consumer digital transaction growth rate was 20%. “Right now, the digital (business) is growing faster, and will probably continue to do,” Brown said on the webcast.
While Brown said competition among the thousands of money transfer companies worldwide is like “a bare-knuckle street fight every single day,” he noted that combat hadn’t changed much recently. What has impacted the business is inflation, which has decreased the average transfer amount, he said.