At stake in this digital race is a growing share of an industry that each year handles more than half a trillion dollars in remittances, in which money mostly flows from migrant workers to their home countries.
Of the $81.8 billion Western Union consumers transferred in 2017, 91% was sent across international borders. Raj Agrawal, finance chief of the company, estimated that westernunion.com money-transfer revenue—which includes use of the mobile app—last year topped $400 million, or about 11% of consumer revenue.
The digital business has been growing at a roughly 20% annual rate, and this year company executives expect $500 million in digital revenue, he added. “It’s becoming a more meaningful part of our revenue.”
Although the digital business currently makes up a relatively small portion of Western Union’s top line, it represents the company’s strongest growth prospects, analysts said.
“There’s no denying that there’s a transition from a world of cash-centric transfers to one in which digital wallets are becoming much more commonly used,” said Darrin Peller, an analyst for Wolfe Research. “The bottom line is that they have no choice; they must invest in e-commerce.”
Some analysts wonder if Western Union has been slow in making digital a priority and whether it has ceded meaningful ground to aspiring fintech rivals in the race to become the international equivalent of Venmo, the popular mobile money-transfer service owned by
Competitors such as PayPal’s Xoom Corp., WorldRemit Ltd., TransferWise Ltd. and Remitly Inc. are leveraging smartphones and other technologies to drive down the cost of sending money across borders.
“It would have been nice to have seen [Western Union] do more acquisitions in this space,” Mr. Peller said. “That would have helped accelerate the process earlier. They are not too late, but they could have done more earlier.”
Western Union’s digital expansion is aimed at grabbing more of the remittance market, which accounted for about $485 billion in international transfers to developing countries, according to the World Bank.
“We are going to be able to address a larger portion of the market,” Mr. Agrawal said.
In the coming weeks, the company plans to launch digital operations in crucial hubs such as Malaysia, Singapore, Mexico and the United Arab Emirates. Last month, the company introduced its mobile app in Mexico, where remittance inflows last year totaled $31 billion.
Western Union’s ultimate goal is to allow customers in 200 countries to be able to send and receive money using whatever methods they choose, whether that means digital services or a walk-up window at a retail location. That would be up from 45 countries where it currently offers that level of service variety.
The company has some advantages that provide a buffer against fintech competition: muscular compliance and regulatory capabilities and a far-reaching physical, retail presence that spans countries where cash is still king, analysts said. Sending a money transfer digitally from one mobile user to another typically requires that both parties are linked to bank accounts, which is still a barrier for some users.
Few companies outside of bricks-and-mortar money-transfer firms
Ria Money Transfer subsidiary can match Western Union’s comprehensive reach.
“Working only in digital, you can only serve those who have a bank account,” said Bob Napoli, an analyst for William Blair. “Everyone is saying cash is going away, but I don’t think that will happen in my lifetime. You still need those payout locations.”
Write to Ezequiel Minaya at firstname.lastname@example.org