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Expanding its money transfer business in China, MoneyGram International Inc. (MGI - Analyst Report) announced the addition of multiple locations in the Zhejiang state of China, through the strategic alliance with Rural Credit Union (RCU) last month.

Accordingly, MoneyGram will now offer its money transfer services to 96 more branches of RCU in China. With more than 4,000 locations of RCU in 1,000 towns of Zhejiang, this state offers ample scope of expansion since it is a very densely populated with about 54 million inhabitants.

Hence, the company aims to offer low-fee, user friendly and secure remittance services in this region. This is an attempt to shore up demand to remit money across 196 global countries where MoneyGram has a strong foothold with a global network of more than 284,000 agent locations, primarily including retailers, international post offices and financial institutions.

Money transfer business remains the driving force for MoneyGram, which has been spreading business across the globe through various recognized financial institutions. Particularly, the company has been vigorously strengthening its position in China, which ranks as the second-largest money receiver in the world with annual remittances of over $62 billion, according to the World Bank.

As a result, MoneyGram has accelerated its agent location expansion in China over the last several quarters. In 2012 itself, the company allied with the leading China Guangfa Bank (CGB) to add 132 locations, and extended services across the Bank of China network for another 3 years.

Meanwhile, the company is also enhancing its brand awareness by developing user-friendly payment solutions that suit the new market trends. With regard to this growth strategy, the company is making efforts to expand its cash-to-account service to other banks, including Industrial and Commercial Bank of China (ICBC), as well as new online services.

Recently, MoneyGram also eased out quick money transfers in Australian dollars in China. For this, the company has encouraged branches of Bank of China, CITIC Bank and Industrial and Commercial Bank of China to dole out payments in the required currency.  Over 12,000 locations of these banks have been identified so far to kick start remittance from Australia, which has about 320,000 Chinese immigrants, in to China without any exchange fee.

We believe expansion through organic strategies is expected to drive MoneyGram’s growth in the medium- to long-term. This growth strategy also justifies management’s guidance of 7–9% top-line growth for 2012.

The aggressive business developments are also crucial for MoneyGram to maintain its competitive edge, particularly against the steady global growth of its arch-rival Western Union Co. (WU - Analyst Report). The company carries a Zacks Rank #3, which translates into a short-term Hold rating, while the long-term stance remains Neutral.

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