Western Union’s digital channels are driving growth (WU)

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Legacy remittance firm Western Union reported its Q4 2018 results, with revenue on Westernunion.com, the digital segment of Western Union’s consumer-to-consumer (C2C) segment, growing 22% annually on a constant currency basis — outperforming the firm’s 1% overall C2C growth.

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Digital revenue represented 12% of total C2C revenue during the quarter, and the C2C segment accounted for 80% of the firm’s overall revenue, which is consistent with Q3 2018.

Digital offerings will be the driving force for remittance firms in attracting new customers, increasing engagement, and accelerating growth.

Western Union’s results reflect an industry-wide trend in which digital growth outpaces overall revenue growth. For context, Westernunion.com grew 20% in Q3 2018, while the firm’s overall C2C revenue grew 2% annually. And competing legacy remittance giant MoneyGram has seen an even bigger gap between digital growth and overall growth, as its digital revenue grew 3% annually in Q3 2018, while its overall revenue declined by 12%, for instance. And because all remittance players are targeting the same customer segment, it’s especially important for Western Union to differentiate itself through enhanced digital capabilities.
Pursuing digital remittances further will allow Western Union to maintain its leading position in the industry amid crowding. Global remittances reached a record high of $613 billion in 2017, but that only reflected a 7% YoY increase. The inherent opportunity lies in digital remittances: Business Insider Intelligence expectsdigital remittances to grow at an 11.5% compound annual growth rate (CAGR) from $225 billion in 2018 to $387 billion in 2023. Pursuing digital offerings can also allow Western Union to ward off any threats posed by digital-first startups that are competing for the same customer segment and have an advantage in offering lower-priced digital services.

Western Union made several strategic partnerships to expand its reach during Q4 — and continuing to do so with an emphasis on digital can allow the firm to accelerate overall growth. In October 2018, Western Union launched a high-value digital transfer capability from the UK, enabling consumers to send transfers of up to £50,000 ($65,000) from the Western Union app or website to markets around the world.

And Western Union partnered with Amazon to become a payment option on Amazon’s checkout page, enabling international shoppers to pay for purchases in-person through Western Union’s services. The integration can open Western Union up to cross-border e-commerce volume, which is set to account for 20% of e-commerce in 2022 to reach $627 billion, according to Forrester.

Expanding digital capabilities, while extending global reach and accessibility, could prove to be an effective strategy for Western Union going forward.

Source: Business Insider