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Western Union's (WU) Digital Abilities to Boost Global Presence

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The Western Union Company (WU - Free Report) recently announced that the company has attained its goal of extending real-time payout to bank accounts, wallets and cards to 100 countries this year. Notably, the abovementioned goal, which was disclosed at the 2019 Investor Day, has led to expansion of the company’s digital payout capabilities across billions of bank accounts even before the end of this year.

Shares of Western Union have gained 5.1% on Nov 24.

It has to be noted that the company has been striving to expand its real-time digital payout capabilities across every corner of the world. The company’s revenues have been under pressure for the past several years due to high competition from peers. This has led Western Union to make significant investments in its digital money transfer arm and build a leading omni-channel platform for cross-border and cross-currency money transfers and payments.

These investments bode well, considering the massive change that the global remittance market is undergoing with accelerated digitization. As a matter of fact, Western Union boasts of a strong global network, which consists of more than 550,000 retail agent locations through which the company’s services can be availed across over 200 countries and territories. In fact, the COVID-19 pandemic has highlighted the importance of moving funds across borders on a real-time basis, which not only takes less time but also requires reduced costs compared to when companies would operate their stores at remittance locations.

Shares of Western Union have lost 18.1% in a year against the industry’s growth of 9.2%.

Looking at the current scenario, Western Union’s digital growth strategy through bolstering its real-time payout capabilities seems to be time opportune. The company has also been reaching out and collaborating with several financial institutions worldwide in a bid to manage international payments better, which has been incremental to Western Union’s growth. Case in point, Western Union decided to buy 15% ownership in Saudi Digital Payments Company or stc pay this month in order to expedite digital growth. Notably, the company already had an alliance with stc pay. Together, they provide money transfer services that enable stc pay’s users to send money from its app to more than 200 countries and territories in above 130 currencies leveraging Western Union’s extensive global network of accounts, wallets, cards and retail.

Some other examples of the same include the company’s extension of its 35-year relationship with Kroger last month, which will benefit the latter’s customers with expanded domestic and international payment services. Further, it formed alliance with Bank-Fund Staff Federal Credit Union (BFSFCU) in September to offer the latter’s members with international payment services. These digital partnerships have not only expanded Western Union’s global reach but have also boosted value to its business.

Some other companies active in the digital money remittance space include MoneyGram International Inc. (MGI - Free Report) , PayPal Holdings Inc. (PYPL - Free Report) and Square Inc. (SQ - Free Report) .

Coming back, the company’s constant investments in its digital arm and digital partnerships have yielded results. Case in point, the company’s two main growth drivers — and digital partnerships, have led to a 45% year-over-year surge in the company’s third-quarter digital revenues. There has been a massive surge in digital transactions, which has been gaining momentum for quite some time. The trend is likely to sustain even beyond the pandemic.

While the coronavirus outbreak has wreaked havoc on the financial markets, substantial work done on the digital front has somewhat helped Western Union to navigate the ongoing challenges.

We believe the company, which has a Zacks Rank #3 (Hold), remains well poised to benefit from its cross-border platform and vast network powered by digitalization. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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