MoneyGram International Inc. is feeling the impact of Walmart’s recent launch of a competing U.S.-to-U.S. white label funds-transfer service, as domestic transfers for the company initiated at Walmart stores declined 31 percent and revenues dropped 33 percent during the second quarter, the Dallas-based company reported Aug. 1.
Transfers from the funds-transfer specialist originated at Walmart domestically for destinations outside the U.S., however, remained strong, the company reported, without providing details. Walmart’s transfers, introduced in April, are only between the retailer’s own U.S. stores.
The shift to Walmart-originated transfers resulted in an $18.8 million year-over-year reduction in second-quarter revenue. Excluding Walmart’s activity, MoneyGram’s transfer activity increased 13 percent and revenue rose 10 percent, with domestic transfers rising 17 percent, the company said in its 8K filing with the U.S. Securities and Exchange Commission.
During an earnings call with analysts Aug. 1, Pamela Patsley, MoneyGram’s chairman and CEO, noted the company still relies heavily on its relationships with Walmart, including for bill-pay and money orders, which drove 23 percent of company revenue for the quarter. “Walmart and MoneyGram continue to have a close relationship, and the combined team is focused on innovative opportunities to accelerate revenue growth and enhanced consumer experience across store formats,” she said.
Also during the call, Alex Holmes, MoneyGram chief financial officer and chief operating officer, noted that, despite Walmart’s girth and heavy marketing, the retailer isn’t everywhere, especially in many inner-city areas. “They don’t have, you know, coverage in a lot of those areas,” he said. “And we have a vast U.S.-to-U.S. business that, you know, that has expanded beyond just Walmart.”
During a June 11 presentation at the William Blair & Co. Growth Stock Conference, Holmes spelled out the potential impact Walmart’s P2P initiative with Euronet’s Ria Financial Services could have on its operations.
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Walmart’s transfer pricing is less than MoneyGram’s, so it has the potential to dramatically affect MoneyGram’s revenues, Holmes said at the time. The product is currently priced about 25 cents less for sends up to $50, and $2 less for those up to $200, a pricing range that represents about 75% of the MoneyGram’s volume.
Once Walmart launched its service, MoneyGram revised its outlook for the year based on anticipation of losing revenue – either from cannibalization of its current product or from MoneyGram having to change prices to adjust, Holmes said in June.
During the quarter ended June 30, self-service money-transfer transactions grew 60 percent year over year and represented 10 percent of transfer transactions, while revenue from self-service grew 42 percent and represented 8 percent of money-transfer revenue, MoneyGram said.
MoneyGram Online money transfer and bill-payment transaction volume increased 41 percent, and revenue was up 31 percent year over year, the company said
As a company, MoneyGram reported total revenues of $372.4 million for the period, up 2 percent from $365.1 million during the same period last year. Net income rose 34 percent, to $25.6 million from $19.1 million.
In Global Funds Transfer, money-transfer fee and other revenue totaled $328.2 million, up 2.7 percent from $319.7 million, while transaction volume rose 4 percent. Bill-payment revenue totaled $24.5 million, down 1.2 percent from $24.8 million.
In Financial Paper Products, money order fee and other revenue totaled $12.3 million, down 4.7 percent from $12.9 million. Official check fee and other revenue dropped 11.6 percent, to $3.8 million from $4.3 million.
Other highlights include 4 percent growth in funds-transfers, with 15 percent growth in U.S. outbound sends, including 21 percent growth in U.S. to Mexico. Conversely, there was a 15 percent decline in overall U.S.-to-U.S. funds transfers.
The company also added 6,000 new agent locations, many in emerging markets, including Indonesia and the Indian subcontinent, bringing its total in the network to 345,000. Some 50,000 locations are in India alone.
