Western Union Co. ( WU Quick Quote WU - Free Report) has provided Australia Post with its digital platform for use, thereby expanding the scope of its services.
The company has an age old relationship with Australia Post, which was initially forged in 2003 to enable money transfer services through the post office’s strong 3,000-branch network in Australia.
This international post office network will drive Western Union’s cross-border business. In 2020, the company’s cross-border principal in its consumer business grew 12%, exceeding the World Bank forecasts.
Australia Post will be the fifth addition to Western Union’s network of post offices, which will be using its digital money transfer services. The company already has tie-ups with France’s La Banque Postal, Italy’s Postepay, Russia’s Russian Post Bank and the United Kingdom’s Post Office Ltd.
Vast Global Network
This move is in sync with Western Union’s strategy to add more and more national postal networks from around the world to offer international digital money transfer services.
Post offices are one of the most cost-effective ways to penetrate any market. The huge national network of post offices along with the retained local public trust in their services provides a fulcrum for expedited growth.
Western Union’s global financial network currently connects billions of bank accounts, millions of digital wallets and cards and more than half a million retail locations. The company is striving to become the world’s largest network of networks.
Western Union has more than 500,000 agent locations worldwide including above 44,000 in the United States alone. It operates in 200 plus countries and in 130 currencies. Its nearest competitor
MoneyGram International Inc. ( MGI Quick Quote MGI - Free Report) runs in 200 countries and boasts a network of 347,000 agent offices including more than 30,000 within the country alone. Winning in Digital
Western Union demonstrated its ability to stay ahead of the digital changes within the industry despite having a long history of operating from its brick-and-mortar stores. Its expansive fintech software, which it has been developing and investing in from the past many years, helped it withstand the ravages of the 2020 pandemic.
Western Union’s online business is raking in moolah fast. Overall, its digital money transfer revenues surged 38% in 2020, surpassing the $850-million mark. For 2021, the company is looking to become a $1-billion digital business.
Apart from remitting funds digitally for its customers and charging fees Western Union is monetizing its digital platform by allowing various other organizations to use it to serve their customers. This is a key component of its strategy to become a more diversified payments company.
Hybrid Model: An Added Advantage
Western Union’s evolution from once solely brick-and-mortar format to a hybrid of online and brick and mortar is now paying off. A combination of its cash and digital capabilities sets it a class apart from the digital-only competitors who are unable to serve a significant chunk of the remittance market that still relies only on cash.
Its long track record of operations enabled it to build massive cross-border corridors (along which money moves). For newly-joined fintech companies to construct such corridors, heavy infrastructure spending is required. This might nibble away their profit margins. Thus, Western Union is better placed in the evolving industry. Other fintech players elbowing the company are
PayPal Holdings, Inc. ( PYPL Quick Quote PYPL - Free Report) , Square, Inc. ( SQ Quick Quote SQ - Free Report) , et al
Its age-old name that dates back beyond 170 years is easily recognized by its customers and works to its advantage.
A Stock to Keep
The stock, currently carrying a Zacks Rank #3 (Hold), is a desirable investment to stick on to owing to its clear growth path and a consistent dividend history. The company has hiked its dividend per share over time and should not deviate from the trend, backed by its favorable cash flows.You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Year to date, the stock has gained 12.9% compared with its
industry’s growth of 0.3%. Image Source: Zacks Investment Research
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