Evaluation of Western Union's Digital Operations

Western Union, a venerable institution that has been in operation for 170 years, is adapting to the latest trends in the remittance sector. The rise of digital technologies has transformed the industry, and Western Union is no exception.

As CEO Hikmet, who has been leading the company for the past decade, noted in a recent discussion, Western Union's digital business includes transactions initiated on web or mobile. A significant portion of this digital business involves cash payout, giving the company a unique product edge due to its extensive global cash payout network.

Despite the substantial digital revenue, Western Union's overall revenue growth has been stagnant. This has raised questions about the company's value, with further analysis planned in the weeks ahead. However, Western Union is not resting on its laurels. The company is pursuing growth in the digital money transfer space through strategic acquisitions.

One such acquisition was the $500 million purchase of Intermex, a move aimed at strengthening Western Union's U.S. retail business and expanding in the high-growth Latin American market. The company is also investing heavily in data, particularly in dynamic pricing, customer behaviour, and fraud prevention.

Western Union's data advantage is substantial, with extensive breadth of consumer data from various corridors and historical data from surviving 32 recessions in the US. This data gives the company a unique insight into consumer behaviour and market trends.

In contrast, players like TransferWise, which is entirely digital at both send and receive, and WorldRemit & Remitly, which are mostly digital at send and receive, are also making waves in the remittance sector. TransferWise, in particular, has surpassed the $300m revenue mark and faces the associated costs and regulatory scrutiny.

The costs associated with scale, such as increased KYC/AML requirements and regulatory scrutiny, become more prominent as a competitor's revenue reaches $300m. Western Union is no stranger to these challenges, but its extensive history and global reach give it a competitive edge.

The most common digital flow for Western Union is debit card pay in to cash pay out. This traditional approach, combined with its extensive global network, makes Western Union the largest digital business by revenue in the remittance space. Its digital business definition is similar to MoneyGram's, another major player in the industry.

As the remittance sector continues to evolve, Western Union is positioning itself to remain a key player. The company's focus on data, strategic acquisitions, and digital customer acquisition will be crucial in this endeavour. The coming weeks will provide further insight into Western Union's future in the digital age of remittances.