Moneygram edges closer to digital targetsMoneygram edges closer to digital targets

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Legacy remittance provider MoneyGram reported ongoing transaction and revenue growth in its Q1 2016 earnings call, held last Friday morning. Though the firm is feeling the impact from global political and economic instability, it posted revenue growth in every segment except US-to-US transfers, which decreased as a result of fewer processed transactions under $100. 

The firm continues to make progress towards its digital revenue goals. The firm has been aiming to have 15-20% of its money transfer revenue derive from its digital segment by 2017. MoneyGram’s latest digital statistics place it very close to that goal:

  • MoneyGram’s digital transaction growth is outpacing its overall growth. MoneyGram transactions grew 7% year-over-year (YoY) overall in Q1, but transactions from digital channels increased by 23%. And those transactions now represent 15% of the firm’s total transactions, a one-percentage-point increase from the previous quarter.
  • That growth is driving up digital revenue. Digital revenue grew 31% YoY in Q1. That’s faster than the company’s overall revenue growth, which was up 12% in constant currency in Q1. But the pace of digital revenue growth is beginning to slow — revenue from digital channels grew 48% YoY in Q4. That could mean the firm’s digital segment is beginning to mature and see some saturation among its target population.
  • Revenue is responsible for a growing share of MoneyGram’s business.Digital revenue now makes up 13% of the firm’s total money transfer revenue, a percentage point increase from Q4 2015. If growth continues at a similar pace, the company will easily meet its 2017 goal. 

Strong digital performance will be critical to keeping MoneyGram competitive in the remittances space. Legacy providers are striving to improve their digital offerings in order to keep up with digital-first firms that have invested heavily in developing user-friendly mobile and online products, which include functions like social messaging. MoneyGram’s digital gains could help stave off disruption in the long term. 

Every year, migrants send hundreds of billions of dollars worth of remittances back to friends and family in their home country. And there’s a massive industry that facilitates these payments — and has for more than a century.

The legacy remittance industry has been long dominated by cash, which requires physical locations where customers can hand over or pick up money. Building out those retail networks is a huge investment. It’s left just a few players, called Money Transfer Operators (MTOs), controlling a bulk of the industry.

But these companies’ comfortable hold on the industry is now being challenged by digital remittance startups. Digital-first remittance companies are competing on fees and usability, and capitalizing on the way people’s expectations have changed with the advent of digital and mobile channels.

Evan Bakker, research analyst for BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on digital remittance that sizes the total remittance market, company-specific market share, digital’s market share, and digital’s growth at major remittance firms. It also assesses how disruptive digital startups have been by comparing their fees with market leaders, and by juxtaposing their business models with those of legacy companies.

Digital Remittance Report CoverBII

Here are some of the key takeaways:

  • Digital’s share of the global remittance industry is still fairly small at 6% — but growth is extremely fast at digital-first startups and legacy companies.
  • Fourteen year-old Xoom makes more revenue from electronic channels than 75 year-old MoneyGram, the second-largest remittance company in the world.
  • Startups are undercutting incumbents’ fees in certain corridors; however, legacy firms have matched prices in many major corridors.
  • Legacy firms’ businesses are already responding to the threats posed by digital by lowering fees and adjusting business strategies. However, they face lower margins if they continue to compete with startups on pricing.

In full, the report:

  • Sizes the remittance market and calculates major remittance companies’ market share.
  • Estimates digital’s share of the market vs. cash.
  • Quantifies digital’s impact at remittance startups and legacy firms.
  • Breaks down the business models employed by each type of remittance company, and determines which ones are in a better position for growth.
  • Compares transfer fees in various corridors to assess the competitiveness of each firm.
  • Explores other platforms that could completely upend the industry from the outside.
  • Determines how legacy remittance companies will fare in the digital age – the answer may surprise you.

To get your copy of this invaluable guide, choose one of these options:

  1. Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP
  2. Purchase the report and download it immediately from our research store. >> BUY THE REPORT

The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of digital remittance.

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