Fueled in large part by its 2011 acquisition of Travelex, Western Union has made great strides in growing its B2B funds-transfers activities. But with just a 2 percent market share, the company’s interim CFO, Anil Agrawal sees a bright future as it looks to tap into what he sees as a $20 billion revenue opportunity.
Western Union’s venture into the B2B space, which essentially began with the company’s acquisition of Travelex Global Business Payments in 2011, now represents 7 percent of company revenues. But it also represents significant growth potential, the funds-transfer specialist’s executive vice president and interim CFO told analysts this week.
At the time the Travelex deal was finalized, Western Union said the combined company would be the world’s leading nonbank provider of cross-border business. Together, it said, the combined business would offer Western Union’s more than 95,000 business clients – mostly small and medium-sized enterprises – immediate scale and expanded global reach in the estimated $24-billion international SME cross-border business payments market.
However, it got out of the gate relatively slowly, possibly because of integration issues or poor economic conditions. But it appears to be gaining momentum.
Speaking at the William Blair & Co. Growth Stock Conference, Raj Agrawal cited Western Union’s relatively low market share – 2 percent – in the B2B funds-transfer business as a chief catalyst for future growth. “We believe this is a great growth opportunity for Western Union because we have a very small share of this market,” he said. “We believe it is a large and growing opportunity.
Global trade is a key underpinning of the B2B market because many of Western Union’s customers have a need to import products, Agrawal said, noting the company uses global trade trend data as a measure to assess the health of its own business.
“In 2012, global trade fell quite dramatically, and in 2013 it was still at a low level and lower than historical norms, but the next few years we see global trade based on market estimates in the mid to high single-digit range, which is really good for our business,” Agrawal said. “We believe it’s a $20 billion revenue opportunity, and so a good growth opportunity for us.”
The performance of Western Union’s B2B the past few quarters has been favorable. “We achieved the third quarter in a row of low double-digit revenue growth, which is where we believe the business can be on a long-term basis,” Agrawal said.
This year’s goal is to have low double-digit growth in total and maintain it for the next few years, Agrawal said. “The market dynamics are right for us to be able to get that growth,” he said. “We have a very low share, we have a large and growing opportunity, and we continue to take share away from the competitors in the market, which are largely banks that provide this service.
Western Union’s B2B activities are focused on executing from a sales standpoint. The company also is driving greater customer retention, which is largely where the growth is coming from, Agrawal said.
The company also introduced new products and services into more markets, Agrawal added. “We believe that the right plans and strategies and assets are in place to drive long-term growth in this business in the low double-digit range,” he said.
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