Will The Western Union Company (NYSE:WU) zoom past Boom, Xoom and MoneyGram?
The largest money-transfer company in the world, The Western Union Company (NYSE:WU)’s Q2 profit was better-than-expected. The lower remittance fees are what tempted a larger number of people to utilize its services. The company has been on a cost-cutting spree and has been investing heavily in its mobile and online business, in a bid to compete with its long-time rival, MoneyGram as well as new entrants, Xoom Corp and Boom Financial Inc.
The decrease in fees helped in boosting the remittance volumes for the company but eroded its profits. Nevertheless, analysts are of the opinion that that the fall was not as steep as expected and that WU was on the right path.
The fee structure
Western Union’s Q2 results were not amazing in the true sense of the word but they are an indication that all the efforts that the management is taking to restructure the business are bearing fruit. WU charges around $8.00 as remittance fees for $100 from a majority of cities in the U.S and Mexico for the fastest money transfer service it has. Contrastingly, MoneyGram charges almost $10.00 for the 10-minute cash transfer service it offers to Mexico.
A prominent analyst noted that the biggest price-cuts were in the range of 20-25%.
Scott Scheirman, the WU CFO said that the planned price-cuts had already been implemented by the company and that no more significant cuts were expected in the latter half of 2013.
Western Union Company (NYSE:WU)’s Q2 transaction volumes increased by 3% from the 2012 Q1. For the quarter, remittances totaled $20.5B in comparison to the $20.1B which they stood at in the previous year. Westernunion.com, WU’s online money-transfer business fared pretty well in the Q2 and clocked a revenue growth of 26%. The company said that it expects the revenue from its digital business to touch $500M by 2015 from the $150 that it currently is at.