Western Union Digs Into Its Digital, Powered-By Platform Future

Western Union shares took a slight dip in after-hours trading yesterday (Feb. 7) when its Q4 earnings met analyst expectations on adjusted earnings per share (EPS), but came in slightly below estimates on revenue. Revenue hiccup aside, however, Western Union CEO Hikmet Ersek remained positive and forward-focused on the result.

“In 2018, we made important strategic progress. We feel confident about our operations and business. In 2019, we will continue to execute our strategy to deliver strong digital expansion, offer our cross-border platform to new payments areas and generate additional operating efficiencies,” Ersek said.

He further called out Western Union’s “strong digital growth” as a major driver of the firm’s results, noting that Western Union’s money transfer transactions increased by 25 percent during Q4.

By The Numbers

As for the fourth quarter’s other heavily watched numbers, Western Union reported earnings of $212 million or $.48 per share in the quarter, versus a loss of $1.1 billion or $2.44 per share in the year-ago period. Adjusted for one-time items, Western Union earned $.49 per share, up from $.41 at this time last year. That $.49 was exactly what analysts had predicted pre-release. Revenue fell 3 percent to $1.4 billion, the company said, below the $1.44 billion a year ago that analysts had been anticipating again.

According to MarketWatch, “for 2019, the company guided for EPS between $1.83 a share and $1.95 a share.”

In other areas of interest, consumer-to-consumer (C2C) revenues, which represented about 80 percent of total company revenue, saw transactions up 4 percent, and revenues increased 22 percent on a constant currency basis. The firm also announced that, to date, Western Union’s website is now available in more than 60 countries, 20 of which were added in the last year. Website revenues represented 12 percent of total C2C revenue in the quarter.

Western Union Business Solutions (WUBS) also saw an uptick, with revenue growing 5 percent on a constant currency basis. Business Solutions represented 7 percent of total company revenues in the quarter, and has been rumored as a potential candidate for a spin-off.

Platform-as-a-Service

In her conversation with CFO Raj Agrawal shortly after earnings were released, Karen Webster wondered, given the growth and potential in that part of the business, if the company’s thinking about shedding it had changed.

Agrawal noted that, while he would not get into specifics on that area, Western Union is evaluating strategic options for some of its business units, including WUBS, as the company actively examines opportunities to more fully leverage its cross-border capacity.

“Digital growth and expansion [are] happening all over the world, and the longer-term growth for Western Union is providing services for a reality that is digitizing more as we speak. That means greater focus on mobile, more ways to offer payouts to accounts. People will think of us in terms of delivering cash-in to cash-out, and this is an important part of what we can do — but we don’t think of it as cash to cash. We think of it as building omnichannel to omnichannel.”

The goal, he noted, is to let the customer decide what type of transaction they need (account to cash, cash to account, account to account), and make it available to them so they can make the choice about what is most convenient to use.

Agrawal also noted that Western Union’s drive to digitization is about more than just offering its own services differently, but about opening its platform’s capabilities for moving money cross-border into a platform that will allow third parties to leverage it. That effort in action, he said, can be observed in Western Union’s partnership with Amazon — which Agrawal said is currently being piloted in 10 countries, and allows consumers to order online with Amazon, then pay for their order in cash at a Western Union location.

Safaricom is using Western Union on a white-label basis so that its 28 million M-PESA wallet holders can send funds from those wallets to any country in which Western Union operates.

“It could take these firms decades to build the kind of capacity we have to settle in 130 currencies in a matter of minutes,” said Agrawal. “We are more than happy to connect them to our platform — and to drive more of the opportunity to delve into Platform-as-a-Service. There is a whole other world of companies where we can provide the services offering, take care of the complexity of the transaction and package it for others to use.”

Agrawal acknowledged that doing so also means something of a shift for how Western Union goes to market: branded versus a white-label powered-by solution. Some consumers, he noted, will always want to work with the Western Union brand up front. Others will recognize the brand as more of a digital acceptance mark that enables their peer-to-peer (P2P) capabilities within the context of another brand. Still, others will never know the brand at all — just the capabilities that it can offer on behalf of another services provider. Agrawal said Western Union sees a great deal of untapped opportunity across any and all of those options.