The challenge posed by digital-only remittance services has prompted a rapid change at MoneyGram.
Led by its chief operating officer
Chytil joined MoneyGram in 2015 after spending 15 years at FIS specializing in e-commerce, retail payments and financial products for the underbanked. In 2017, Chytil was recognized as one of PaymentsSource’s
MoneyGram's transformation during the pandemic was made possible by groundwork established years earlier. This was both a technological shift and a cultural one.
“About three years ago, we embarked on a transformation to become a customer-focused company with a direct-to-consumer business,” said Chytil. “Previously, MoneyGram was very transaction-focused. We knew where the money was going and who was sending it, but didn’t focus on things that are key to being customer-centric. Our products were designed primarily for the distribution aspect of our business — Walmart, Canada Post and other agents — rather than the consumers who came in to pay for transfers.”
Focusing on customers involved developing loyalty programs with rewards, discounts on multiple transactions, and promotional codes, as well as improving the user design for MoneyGram’s digital channels.
“We began communicating with our digital customers in a personalized way in their own language via emails, SMS and chat,” said Chytil. “It’s been a ton of work, but it’s paying off, and we’re seeing major growth in our digital business.”
With COVID-19 lockdowns, MoneyGram’s investment in digital seems prescient. In its first quarter, which ended March 31, MoneyGram saw 57% growth in digital transactions year-on-year, while walk-in transactions fell 6% year-on-year. Digital transactions accounted for 18% of all MoneyGram remittance transactions at the end of the first quarter.
In April, MoneyGram saw 81% year-over-year growth in digital transactions, and at the end of April, digital accounted for 28% of all MoneyGram transactions. Over 80% of MoneyGram’s digital transactions occur via mobile devices.
Due to COVID-19-related mandatory closures and stay-at-home orders, MoneyGram’s walk-in cash remittance business declined by 19% in April, in line with the World Bank’s forecast that
“Because our core demographic tends to be immigrants, they obey shelter-in-place orders,” said Chytil. Even though they are legal immigrants, “they don’t want to risk encounters with police by going to stores to send money, so they want digital remittance options. Since the pandemic began, we’ve seen remittances to e-wallets triple, and to encourage transfers from bank accounts to e-wallets, we’re offering zero fees. Our highest digital fee is $4.99.”
MoneyGram has seen how remittance areas that depend heavily on the tourism industry, for example the Caribbean, have shut down.
“Cruise lines that were full of Filipino, Indonesian and Eastern European workers who send money home, haven’t been operating,” Chytil said. “So remittances by these workers from Caribbean ports have just stopped. By contrast, we’ve seen big growth in digital remittances to African countries with mobile money schemes, with remittances to Morocco growing by 300%.”
The decline in cash remittances has occurred despite the fact that, in many countries, money transfer agents are considered essential businesses, since migrants sending money home intend it to be used for essential needs. Also, many of MoneyGram’s agents are in grocery stores or post offices, which are essential businesses.
In the Middle East, where many money transfer agents have been closed, there has been a rise in digital transfers, the
However, there is a risk that, with large crowds gathering at remittance offices, governments may implement measures regulating how these locations are managed to avoid massive crowding and prevent the spread of COVID-19.
MoneyGram is working with the World Bank to issue guidance to governments that money transfer agents are essential businesses.
“We’ve also published flyers that we send to agents saying: ‘You are considered an essential business, please remain open,’” said Chytil. “To support our agents, we’ve issued guidance for them about social distancing and how to manage queues, and provided masks and hand sanitizer once it became impossible to find them locally.”
The migration rate of MoneyGram’s walk-in customers to its digital channels has doubled from the previous rate of 3% to 6%.
“But it’s too early to say how big an impact COVID-19 will have on our cash-to-digital migration rate,” said Chytil. “The migration is still quite small, and we’re winning the majority of new customers in our digital business from competitors rather than from our walk-in business. We ask ourselves every day, ‘How do we persuade cash-senders to convert to digital?’ But I believe that consumers have to be ready to adopt a new technology, and that it takes a tremendous amount of advertising to convince them to do so. But, until they are ready, this is usually futile.”
The Chinese mobile payments revolution led by Alipay and WeChat Pay hasn’t been duplicated in many of the cash-dominated remittance markets where MoneyGram operates.
“For example, in the Philippines the majority of remittances still go to cash,” said Chytil. “In Canada, we have a strong brand presence through our partnership with Canada Post, whose post offices are the primary way for migrants in Canada to send money. So, when we introduced our digital app in Canada, we expected a significant portion of our Canadian demographic to convert to it, as they are so familiar with our brand. But that hasn’t happened.”
Chytil said that many people sending money home have traditionally used banks, despite their high fees and poor FX rates.
“It’s the people using banks who are migrating to Western Union’s and MoneyGram’s digital platforms or to the digital-only startups,” she said. “This is because you need a bank account and debit card to send digital remittances. It’s a misconception that the majority of today’s remittance market is unbanked migrant workers. A substantial percentage are expatriate professionals such as Indian IT workers who are sending a big portion of their salary home to buy real estate for their retirement.”
In recent years, MoneyGram has established sending and receiving partnerships with fintechs and mobile money transfer services such as Qatar’s Ooredoo, Korea’s Sentbe, Africa’s Zeepay and M-Pesa, and Latin America’s Tigo. In December 2019, it launched a service allowing U.S. consumers to send funds with their debit cards using Visa Direct to 12 countries for $1.99 per transfer. MoneyGram’s digital partnership channel saw 25% direct transaction growth in Q1 2020 year-on-year, rising to 59% by April 27.
“When we partner with mobile money services, they own the customer relationship, and we integrate with them in the background via an API,” said Chytil. “We’ve also expanded our network of banks in receiving destinations such as Egypt and India that customers can send funds directly to. We now offer near-real-time transfers to bank accounts at India’s Federal Bank, for example.”
