Western Union Co. (WU - Analyst Report) has announced the launch of a unique prepaid remittance card in El Salvador in partnership with AirPak, one of the company’s agents in Central America.
The newly-launched Western Union receiver remittance prepaid card will enable users to make partial or complete transfer of funds to a prepaid MasterCard.
Western Union aims to tap the El Salvador region, attracted by its huge remittance volume. The region approximately received $3.6 billion in remittance in 2010. Moreover, its underbanked population, evident from the fact that only 47% of adults have bank accounts, offers a huge opportunity to penetrate the region.
The Western Union-AirPak remittance card will also make it easy for Salvadorans to make payments for online shopping and can be used at all the portals where MasterCard is used. The card can also be used at ATMs.
Western Union offers prepaid card services along with MasterCard Inc. (MA - Analyst Report). Both the companies announced a strategic alliance to offer consumer friendly prepaid cards in November 2011.
Western Union offers its stored value service, an alternative channel for money transfer via Western Union Ventures, which is one of the key growth areas for the company. With prepaid cards, it aims to offer an additional service to new and existing consumers in the fast growing global market.
In prepaid, the company ended the year 2011 with nearly 1.5 million cards in force, and retail distribution at over 20,000 U.S. locations. From the first quarter of 2012, the company’s GPR cards are available at more than 3,000 7-Eleven locations, with more being added.
The company introduced its first prepaid offering in the UK, and began testing in Austria and Germany in the fourth quarter. In total, prepaid, including third-party top up, represented less than 1% of company revenue for the year 2011. We believe there is a major global opportunity in prepaid and the company is positioned to compete effectively.
Western Union is evolving and combining its existing assets—including its superior brand and a global network— with the web, mobile infrastructure, stored value capabilities and focused strategic partnerships.
Western Union currently retains a Zacks # 3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on its shares.