A growing portion of Western Union customers have gone digital, thanks to mobile apps and online banking that let consumers transfer money without actually touching it.
The Douglas County-based company said online transactions jumped 34 percent in the third quarter, while online revenues grew 21 percent in the same period, ending Sept. 30. Electronic revenues made up 6 percent of overall revenues of $1.4 billion in the quarter.
“Our customers want to use new channels to send or receive money,” said Khalid Fellahi, the company’s senior vice president and general manager of Western Union Digital. “In retail stores, the transaction was primarily in cash. But for the past two years, we’ve been offering other payouts, like sending money to bank accounts or mobile wallets (to users) in other countries.”
Western Union, which employs 1,200 people in the Denver area, doesn’t charge extra to send cash digitally versus going to a store. In some cases, the fee to send digitally could be less.
The move to digital is really about catching up, according to IBIS World, a market researcher. In a report last month on loan and money-transmission services, IBIS World said competition had affected Western Union’s margins.
“Declining profit margins have been driven by increasing competition in the money transmission segment with the popularity of services like Quick Chase Pay, Venmo LLC and Paypal increasing considerably over the five years to 2014,” according to the report.
Western Union began investing in digital three years ago by opening a dedicated division in San Francisco and launching mobile apps. Its primary business is still customers who walk into a store to send cash to family in another country, but Western Union’s fastest-growing business is digital.
Transactions from (which includes online and mobile) are up 44 percent for the first nine months this year compared with last year. Revenues in the same prior are up 31 percent, according to company filings.
Users are less-frequent senders and use the service because of an emergency or to send a gift. But 80 percent of them are new to Western Union, Fellahi said.
“These are people not moving from retail or another part of the business,” Fellahi said. “The new people are those who used to do it from their bank or (money transfer centers) but now can do it with the leader of the industry and with someone they can trust.”
They’re also sending money to bank accounts or mobile wallets on smartphones, instead of the traditional retail store where the recipient picks up the cash.
“Even though we are the largest business that does money transfer, I’d say the market share we have in the digital business is still small,” he said. “We are just gaining marketshare.”
Tamara Chuang: 303-954-1209, tchuang@denverpost.com or twitter.com/Gadgetress
