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MoneyGram, the second-largest global remittance provider, posted gains in its largest segments in Q2 2016.
But despite bottom-line growth, geopolitical and economic instability across the globe impacted the firm’s overall success and caused it to revise its revenue goals downward for the year.
That means that, in the coming quarters, MoneyGram will focus on doubling down on efforts to satisfy customers and differentiate its brand, according to CEO Alex Holmes.
Digital, which remains a valuable growth driver, could be a key component of that strategy.
- Digital has become a key acquisition tool for the firm. Moneygram.com attracted over 214,000 new customers for the firm in Q2, indicating that the firm's website is a key draw for new users.
- Digital transaction growth remains high, despite moderation. The firm’s overall number of digital transactions grew by 9% year-over-year (YoY) in Q2. That’s still outpacing overall transaction growth, which was 6% in the quarter, but is much lower than the 23% YoY digital growth figure that the firm posted in Q1. Digital now comprises 15% of the company’s overall transactions.
- That’s driving up digital revenue, which continues to account for a significant share of the firm's business. As a result of transaction growth and customer acquisition, digital revenue, up 17% YoY, comprises 13% of MoneyGram’s total money transfer revenue. The percentage that digital contributes is flat sequentially, but the firm has been aiming to have 15-20% of its money transfer revenue derive from its digital segment by 2017 — a goal it’s still very much on target to meet.
The firm needs to find ways to re-accelerate its digital growth. MoneyGram's digital growth is slumping. And though that could be partly due to the firm's overall challenges, it remains problematic because digital has been the firm's highest-growth segment in recent years. MoneyGram needs to find ways to revitalize the segment in the coming quarters to ensure they keep growing at a healthy rate and to ensure they can compete among other players as both legacy and digital-first firms invest in innovative technology and new channels.
Every year, migrants send hundreds of billions of dollars worth of remittances back to friends and family in their home country. And there's a massive industry that facilitates these payments — and has for more than a century.
The legacy remittance industry has been long dominated by cash, which requires physical locations where customers can hand over or pick up money. Building out those retail networks is a huge investment. It's left just a few players, called Money Transfer Operators (MTOs), controlling a bulk of the industry.
But these companies' comfortable hold on the industry is now being challenged by digital remittance startups. Digital-first remittance companies are competing on fees and usability, and capitalizing on the way people's expectations have changed with the advent of digital and mobile channels.
Evan Bakker, research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on digital remittance that sizes the total remittance market, company-specific market share, digital's market share, and digital's growth at major remittance firms. It also assesses how disruptive digital startups have been by comparing their fees with market leaders, and by juxtaposing their business models with those of legacy companies.
Here are some of the key takeaways:
- Digital's share of the global remittance industry is still fairly small at 6% — but growth is extremely fast at digital-first startups and legacy companies.
- Fourteen year-old Xoom makes more revenue from electronic channels than 75 year-old MoneyGram, the second-largest remittance company in the world.
- Startups are undercutting incumbents' fees in certain corridors; however, legacy firms have matched prices in many major corridors.
- Legacy firms' businesses are already responding to the threats posed by digital by lowering fees and adjusting business strategies. However, they face lower margins if they continue to compete with startups on pricing.
In full, the report:
- Sizes the remittance market and calculates major remittance companies' market share.
- Estimates digital's share of the market vs. cash.
- Quantifies digital's impact at remittance startups and legacy firms.
- Breaks down the business models employed by each type of remittance company, and determines which ones are in a better position for growth.
- Compares transfer fees in various corridors to assess the competitiveness of each firm.
- Explores other platforms that could completely upend the industry from the outside.
- Determines how legacy remittance companies will fare in the digital age – the answer may surprise you.
To get your copy of this invaluable guide, choose one of these options:
- Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP
- Purchase the report and download it immediately from our research store. >> BUY THE REPORT
The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of digital remittance.
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