Under pressure from changing market conditions and challenges from digital-based competitors, money-transfer giants The Western Union Co. and MoneyGram International Inc. both reported disappointing second-quarter results. In addition, Denver-based Western Union said it will chop its workforce by 10% over the coming months as part of a cost-reduction campaign it expects will generate $50 million in savings next year and $100 million annually starting in 2021.
The campaign will also include the consolidation of some corporate and business offices, Western Union said Thursday. The company employs approximately 12,000 people globally, including 2,400 inside the United States, according to its 2018 10-K filing to the Securities and Exchange Commission.
Dallas-based MoneyGram on Friday said its results have been hurt by a slower-than-expected recovery of its U.S.-based outbound market and a weakness in its internal U.S. business.
Both companies face increasing competition from digitally native rivals such as Xoom, part of PayPal Holdings Inc., and Seattle-based Remitly Inc., which from their start have allowed users to transfer funds online and via mobile devices. Also, the rise of the blockchain and related cryptocurrencies has started to pose a challenge to the two established players, a factor MoneyGram recognized this spring by taking a $30 million investment from Ripple Inc. The deal gives MoneyGram access to Ripple’s xRapid network and XRP digital currency for cross-border settlements, and includes an option that would allow Ripple to invest a further $20 million in MoneyGram.
Western Union reported second-quarter revenue of $1.3 billion, down 5% on a reported basis and up 4% on an adjusted constant-currency basis compared to the same quarter in 2018. The reported revenue excludes divestments, including the $750-million sale of its Speedpay business in May to ACI Worldwide. MoneyGram’s revenue totaled $323.8 billion for the quarter, down nearly 14% year-over-year. The company also logged a net loss of $27.2 million, compared to net income a year ago of $2.3 million.
Digital transfer is still a small part of the business for both companies, but growing fast. MoneyGram reported its digital revenue came to 16% of its $282.2 million in money-transfer revenue in the quarter. Western Union reported its westernunion.com business, which is part of its consumer-to-consumer unit, saw its revenue rise 18% on a reported basis and now accounts for 13% of total C2C revenue.