Legacy remittance firm MoneyGram posted $345.8 million in total revenue in Q4 2018, marking a 14% annual decline on a constant currency basis. For context, MoneyGram’s revenue declined 4% annually in Q4 2017 and 12% annually in Q3 2018, meaning revenue is now declining at a faster rate.
Meanwhile, digital revenue — which represents 16% of money transfer revenue — declined 7% year-over-year (YoY), which, while a decline, still outpaces growth in overall revenue. This dip in digital revenue was driven by a decline in domestic US volume, and when the US to US corridor is not accounted for, digital revenue grew by 25% annually.
For context, MoneyGram’s main competitor, Western Union, saw its overall revenue grow by 1%YoY in Q4 2018, while its digital segment revenue grew by 22% YoY.
As digital volume becomes the driving force of the remittance industry, MoneyGram will have to bolster its digital capabilities amid emerging threats from digital upstarts.
MoneyGram has already made several efforts to bolster its competitive positioning. Throughout Q4 2018, MoneyGram made several moves to expand its network and accessibility: MoneyGram updated its mobile app to enable users to send transfers from the US — its biggest send market — to 14 other countries, including the UK, Australia, and Germany.
And the firm partnered with US grocery chain Kroger to enable bill pay at more than 1,900 Money Service counters at Kroger and its subsidiaries’ locations. Continuing to add more geographies to its network can help MoneyGram expand its volume, while adding additional capabilities beyond money transfer can allow the firm to target customers with more specific use cases.
But more threats are emerging as digital remittance firms broaden their capabilities. Digital-first remittance firms are crowding the space, and they’re able to undercut legacy firms on pricing, while offering comprehensive digital capabilities that consumers want — ultimately making themselves more competitive. Those threats are mounting as more upstarts enter the space.
For example, several digital remittance firms recently announced partnerships with distributed ledger fintech Ripple to bolster the speed of their offerings — one of the areas consumers value most in remittances: MoneyGram partnered with the firm last year to test real-time cross-border corporate payments; SendFriend raised $1.7 million in funding, which it will use to better enable remittances between the US and the Philippines by leveraging Ripple’s technology; and UAE Exchange and Unimoni, both of which are owned by Finablr, each went live with Ripple technology to enable real-time cross-border remittances to Thailand, according to Coindesk.
A significant opportunity lies in digital remittances: Business Insider Intelligence expects digital remittances to grow at an 11.5% compound annual growth rate (CAGR) from $225 billion in 2018 to $387 billion in 2023. As the remittance space becomes increasingly crowded with digital firms, MoneyGram should prioritize its digital segment to accelerate its volume and revenue, while maintaining its leading position.
Source: Business insider