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MoneyGram's (MGI) Solid Digital Arm Continues to Bode Well

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MoneyGram International, Inc. recently announced that its online platform has been gaining traction from strong customer demand, driven by its digital capabilities. This upside led to robust digital transaction growth for the company in October.

Notably, the company witnessed cross-border transaction growth of 150% year over year in October for MoneyGram Online (MGO), its direct-to-consumer digital business. However, this upside was lower than 161% cross-border transaction growth in September. In August and July, the same was up 207% and 162%, respectively.

With its cross-border business gain in October, MoneyGram's business momentum witnesses the 10th consecutive month of triple-digit cross-border transaction growth in its direct-to-consumer digital business, MoneyGram Online.

Following the COVID-19 outbreak, the company’s digital transactions gained an added impetus as more customers opted for digital channels to make their payments. This is clearly evident from the revenue gain of 4% in the money transfer business, which was mainly driven by the company’s digital business.

A robust digital arm bodes well for MoneyGram as its revenues have been declining since 2017 through the first nine months of 2020. Revenues have been affected by a higher compliance control strategy and stiff competition.

The company began laying the groundwork for its digital transformation four years ago to embrace the rapid changes brought about with the expansion of technology in the remittance industry. Its consumer direct channel MGO is the largest component of its overall digital business and a steady catalyst for customer acquisitions. Consumer demand for the company’s mobile app has been skyrocketing and 85% of its online transactions is- now done on mobile devices. This business continues to be a significant driver of profitability as the company is quickly scaling it up.

With the outbreak of COVID-19, the company also saw a marked shift in the origination of transactions. Notably, its digital transactions represent 27% of the total money transfer transactions and its global MGO business is the single largest originator of transactions.

Via its digital business, the company is exploring new geographies and continuously wooing a completely new customer base.

With several fintech players, such as PayPal Holdings, Inc. (PYPL - Free Report) , Square Inc (SQ - Free Report) and others offering similar services at affordable rates, competition for MoneyGram naturally intensified over all these years. Its close peer Western Union Co. (WU - Free Report) is also facing the same rivalry and has been pursuing technological investments to stay within the race.

Year to date, the stock has soared 196% against its industry’s decline of 21.8%.

MoneyGram carries a Zacks Rank #3 (Hold), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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