Western Union Expands in Mexico - Analyst Blog
03 10월 2012 - 10:45PM
Zacks
In an effort to expand its presence in Mexico, Western
Union Co. (WU) has signed an agreement with Banco Ahorro
Famsa, one of the most renowned banking institutions in the region.
Per the agreement, Western Union will offer its money transfer
service across 300 Banco Ahorro Famsa locations in Mexico from
November this year.
Banco Ahorro Famsa will also offer its service Vigo, and
Orlandi in the region.
Banco Ahorro Famsa’s long history of approximately 4 decades
of operations in Mexico encouraged Western Union to enter the deal
with the former. The region accounts for around 6% of Western
Union’s revenue. It ranks among one of the major receive
locations.
Receive locations are the ones with large inbound remittance
markets. The company has been operating in the Mexico corridor for
more than a century. Although, Mexico accounts for a
significant amount of the company’s annual remittance volumes, in
the past three years it exhibited a lackluster performance.
Revenues in 2010 were flat against transaction growth of 2%.
Recessionary conditions in 2009 resulted in a 12% transaction
decline and a consequent 15% decline in revenues.
Nevertheless, with a gradual improvement in the economy, the
region showed a 2% revenue growth in 2011, with transaction volumes
remaining unchanged relative to 2010.
Western Union is evolving its business model and practices
pertaining to Mexico. The company is in the process of renewing
agent agreements and changing the way it operates in the region,
including compliance-related changes. As a result of these factors,
management expects its Mexico business to decline in the near term,
as the company modifies the business. During the second
quarter, Mexico-based revenue was down 7% and transactions were
down 5% year over year.
Barring the above factors, we note that Mexico qualifies as
one of the top four inbound remittance countries in the world and
it is anticipated that the remittance market will continue to
recover as the global economy improves.
Mexico’s vast remittance market has also dragged Western
Union’s close peer Moneygram International, Inc.
(MGI). The company offers its services in the Mexican market in
partnership with Visa (V), which allows consumers
to visit any of the 35,000 MoneyGram locations in the U.S. to send
funds to eligible Visa accounts in Mexico.
Western Union currently retains a Zacks #3 Rank, which
translates into a short-term Hold rating. We are also maintaining
our long-term Neutral recommendation on its shares.
MONEYGRAM INTL (MGI): Free Stock Analysis Report
MONEYGRAM INTL (MGI): Free Stock Analysis Report
VISA INC-A (V): Free Stock Analysis Report
WESTERN UNION (WU): Free Stock Analysis Report
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