Western Union (NYSE:WU) has posted their earnings report for Q4 2019.
Revenue came in at $1.3 billion which missed analysts’ expectations of $1.325 billion and an EPS of $0.32 missed analysts’ expectations of $0.41.
Overall, the stock has performed very well throughout the past year, it is up more than 50% since the same time last year.
Old Player Eyes A New Market
Western Union had its humble beginnings as a casual telegram communications empire back in the late 19th and early 20th century. In a sign of the changing times, the company discontinued its telegram service back in 2006 and is now mostly focused on money transfers. Its services include person-to-person money transfers, money orders, business payments, and other commercial services.
It is hard to get exact numbers on global market share but in a paper published by The International Fund for Agricultural Development (IFAD), it is estimated that Western Union has about 40% market share in money transfers in Africa, while its next closest competitor MoneyGram, has a 24% market share in Africa.
Clearly, both companies realize that emerging markets such as countries in Africa represent a huge opportunity. Many African countries typically lack big and stable financial institutions like the ones that exist in Europe and North America, so the need for digital and easy to access money and banking solutions is high.
This Room Is Getting Rather Crowded
There’s big money in money. Even tech companies want to get in on a piece of the money-transferring pie. In early 2017, Alibaba Group (NYSE: BABA), the Chinese eCommerce giant, announced their intentions to acquire MoneyGram in a deal valued at $880 million in an effort to expand their financial services brand called Ant Financial.
The deal was ultimately blocked by the Committee on Foreign Investment in the United States due to concerns of increasing Chinese ownership of U.S. companies. However, this may be an indication that other companies, most notably U.S. companies like Amazon, might try and do the same one day.
Meanwhile, Facebook has promised to revolutionize the financial system with their own cryptocurrency named Libra. If successful, Libra can enable almost instant money transfers through just an app on the user’s phone by leveraging blockchain technology. Libra is set to launch sometime later this year and could further disrupt the field of money transferring by completely changing the game.
It is also worth mentioning the British firm TransferWise which while still private, has been valued at over $3.5 billion. TransferWise uses a rather unique business model where it matches a user’s money transfer with other users who are sending money the other way around. This effectively skirts currency exchange since the money never actually crosses borders and consequently the user is able to save the high fees of cross-border money transfers.Without some new innovations, Western Union may be in trouble for the long term as smaller companies like TransferWise and big companies like Facebook, continue to eat up market share in a big way. It remains to be seen if Western Union can fend off its competitors in the long run.
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