Earnings

Western Union Grows Digital Double-Digits, Expands Underbanked Reach With Amazon

Double-digit growth marked Western Union’s digital offerings, and now represents 12 percent of the firm’s key C2C business. Management pointed to solid growth spanning several cross-border corridors — and, of course, the new pact with Amazon got its share of attention on the post-earnings call.  

Traction with digital transactions marked Western Union’s latest results on Wall Street, while a newly minted agreement with Amazon grabbed its share of attention on the post-release third-quarter earnings call on Thursday (Nov. 1)  — and trained a spotlight on the lures of eCommerce done cross-border. Generally speaking, in terms of consolidated top- and bottom-line results, Western Union’s revenues of $1.39 billion were just shy of the $1.42 billion expected by the Street, and its reported earnings of $.52 cents a share were $.04 better than estimates.

Looking at the largest business segment known as consumer-to-consumer (C2C), which is 80 percent of the company’s top line, revenues were up 2 percent on a constant currency basis, outpaced by transaction growth of 4 percent. Transaction flow came from geographic regions that included North America, Latin America and Europe — where cross-border principal, currency adjusted at $20.4 billion, was up 7 percent, as noted in supplemental materials provided by the company. In total, across the C2C segment (and, again, as addressed by supplemental materials), principal per transaction was $313, currency adjusted, gaining 4 percent year on year.

The company spotlighted transaction and revenue growth in regions such as Latin America and the Caribbean, metrics that were up 11 percent and 2 percent, and Europe, where those metrics were up a respective 8 percent and 3 percent.

Price reductions in the Middle East meant that revenues were down by 6 percent in the period, though transactions ticked up by 2 percent. Management noted on the call that transaction growth was positive for the first time in several years.

Digital Business Gains Ground

Western Union said its website revenues continued to grow, as a percentage of the C2C segment, to a 12 percent contribution  where, in the second quarter of this year, that contribution to total C2C sales was 11 percent. Drilling down into that segment, digital contribution transactions gained 23 percent, while constant currency revenues were up 20 percent.

The Western Union website is now available in more than 50 currencies and territories, said CEO Hikmet Ersek during the call. That number shows growth in 45 countries and territories during the second quarter.

In one callout to growth on account-to-account (A2A) transfers and digital initiatives, the CEO noted the debut this month of high-value digital account transfers. In the U.K., users can now send up to £50,000 ($64,994 USD) internationally via their smartphones from the mobile website or the Western Union mobile app. The company said that as many as 70 percent of its digital transactions originate on mobile devices.

Looking at the Business Solutions segment (B2B), revenues were at 7 percent of the total company top line, gaining 3 percent as measured year on year. As has been noted in this space and elsewhere last month, Western Union has reportedly been mulling a sale of this unit, according to unnamed sources. CFO Rajesh K. Agrawal said on the conference call that the company would not comment on such speculation, stating that there was nothing new to announce, though strategic options are always under consideration. Within that Business Solutions segment, said the CFO, among standout verticals has been a boost from the educational sector.

Other revenues, tied to bill payments businesses in the U.S. and Argentina, were down 9 percent on an as-reported basis, but up 7 percent on a constant currency basis. The company estimated that the strengthening of the U.S. dollar against the Argentine peso hit this segment by 16 percentage points in the quarter.

In reference to the competitive landscape and analyst questions about Walmart, which had announced an international money transfer platform earlier this year in partnership with MoneyGram, on top of its domestic transfer business, Ersek said there has been “no significant impact”  and that his company remains “well-positioned” in the U.S. and through its digital efforts. In terms of the overall landscape on an international stage, Agrawal noted that the cross-border growth rates seen for Western Union were up significantly higher than the estimated rates of about 4.5 percent by the World Bank.

Perhaps not surprisingly, analysts queried management on the strategy and rollout of the partnership announced Wednesday (Oct. 31), where the firms are offering a new international payments option to Amazon customers.

As reported by PYMNTS, Amazon customers will be able to pay in local currency — at Western Union agents — for the items they buy online. Ersek repeated on Thursday’s call that the agreement (where, he said, “we are a provider to Amazon … we provide the platform”) allows for consumers to “buy globally … and pay locally.” Amazon, he said, will announce the markets into which the partnership will extend, and added, in response to analyst questions, that the increased penetration will also bring eCommerce to underbanked consumers.

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