Western Union Reports Q4 Growth, Confirms Ripple Test

Western Union reported results Tuesday that showed continued momentum in its digital business, as consumer money transfers grew on a cross-border basis.

The company posted 4 percent growth in the top line to $1.4 billion, which topped the Street by $40 million, while earnings of 41 cents a share missed the Street by four pennies.

In remarks made on the earnings call, Hikmet Ersek, president and CEO of the company, said that the improvement in the top line came amid improved spend in the company’s consumer-focused money transfer business.

Westernunion.com’s business was up 22 percent, representing 10 percent of consumer-to-consumer revenues.

Geographically speaking, there was some notable improvement in transfer activity amid oil-producing countries and from Africa.

The Business Solutions unit saw declines of 4 percent year over year, which led to a goodwill impairments charge, with the decline stemming from decreases in hedging sales and poor performance in Europe, especially in the U.K.

“In consumer money transfers, we continue to believe digital will be the growth driver” – and thus investments will continue to target more countries with westernunion.com and continued expansion into mobile transactions, said the CEO.

Looking ahead, cross-border transactions should show growth in 2018, said management, while U.S. domestic business might decline amid continued competition from free P2P offerings from competitors.

Overall, though, the company expects stable pricing in 2018.

The CFO said that in North America – which accounted for 37 percent of C2C transactions – revenues were up 3 percent, while transactions gained 1 percent. The North America business was marked by strong outbound transactions to the Caribbean, Latin America and India. In Europe, revenues were up 2 percent on a constant currency basis, led by France, and overall transaction growth was at 7 percent year over year. Inbound transactions to India rebounded, with transactions growing 7 percent in the wake of last year’s demonetization efforts by the government.

During the conference call with analysts, and in response to a question on digital transaction growth and margins, Ersek noted the 22 percent growth and that the company is only in 40 countries and sending money to 200 countries with the digital offering; the country wants to be, fully, in 200 countries across corridors.

The domestic business is still marked by sending cash payouts, said the CEO, cash to cash or retail money transfer. And he noted that zero fee offerings, such as Zelle and Venmo, have been making inroads in this arena.

Separately, Western Union said the company is examining blockchain technology, and at the same time is testing transactions with cryptocurrency firm Ripple. The CFO told Bloomberg that actions are still in a “testing phase” and that there is nothing yet that would be considered a big “unlock.”

During the call, an analyst asked about blockchain. Ersek said that “as a financial institution, we do look at blockchain in general and we’ve been doing that for some time, I would say, and we are looking especially in the processing settlement and working capital optimization, also in the regulations part, on the compliance part on the blockchain.”

Noting the aforementioned Ripple test, he said in a nod to crypto, “it’s not something to report that we’re going to change the environment, our existing capability is very stable, as you can see from our performance, but that’s something that we are taking seriously and looking at and testing.” Later during the call, he told analysts that “on the crypto currency side, look, currency is currency. I think the big advantage we're seeing globally is that we turn any currency to a use case.”

A Ripple spokesperson commented, “We've been testing different products with Western Union for a while. We're excited about our work towards a pilot implementation of xRapid, which uses XRP in payment flows."



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