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MoneyGram Reports Growth in Digital Channels Amid Mixed Results for 2015

Dallas-based MoneyGram International Inc. posted a mixed set of financial results for all of 2015 and for the fourth quarter as it looks to continued growth in its online business. The money-transfer specialist also said Thursday it has settled for $13 million a legal inquiry into its fraud-prevention measures.

For the quarter, MoneyGram’s revenue of $376.7 million was 7.8% higher than the $349.6 million in revenue for the same quarter a year ago. Its annual revenue, however, was $1.43 billion, a decrease of 1.4% from $1.45 billion.

Net income for the quarter was $2.6 million, a 75.2% decrease from $10.5 million in 2014. The company posted a $76.9 million annual loss compared with a profit of $72.1 million in 2014. The reversal in profit, according to MoneyGram’s 8-K filing, is owing to interest expenses.

“2015 was a transition year for the company as we repositioned our U.S.-to-U.S. business and continued to invest in digital/self-service products, consumer acquisition strategies, compliance, and agent productivity,” said Alexander Holmes, chief executive, during a conference call with analysts.

“In 2015, our digital channel showed impressive growth throughout the year, with fourth-quarter transactions up 42% and revenue growth of 48%. [Fourteen percent] of our money-transfer transactions and 12% of our total money-transfer revenue came from digital in the quarter,” Holmes said, according to a transcript. “This business now represents over $163 million when annualizing fourth-quarter revenue.”

MoneyGram’s goal is for 15% to 20% of its money-transfer revenue to come from digital channels, which include and mobile wallets, by 2017, Holmes said. “As we move ahead, we\’ll be pushing digital capabilities further into the physical world through customer profiles and new point-of-sale technologies, which will ensure that we deliver a more seamless customer experience,” he said.

Analysts are encouraged by MoneyGram’s course. “Fiscal 2015 was a transitional year for MoneyGram, but trends improved sequentially through the year,” wrote Robert Napoli, an analyst at William Blair & Co. LLC, in a research note.

MoneyGram also signed a three-year agreement with Wal-Mart Stores Inc., which represents approximately 19% of MoneyGram’s total revenues. “Now that this deal has been re-signed, we think concern about the relationship should dissipate for the next couple of years,” noted analyst Lawrence Berlin with First Analysis Securities Corp. in a research note.

The $13-million legal settlement related to a civil-investigative demand from nine state attorneys general over MoneyGram’s fraud-prevention measures, which are designed to prevent third parties involved in fraud schemes from using its money-transfer service. The settlement requires MoneyGram to improve its customer-complaint process and employee-training program.

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