Western Union has long
The remittance provider's digital money services grew 36% to a new quarterly high of $240 million compared to a year earlier, but that was tempered by an overall fourth-quarter decline in revenue stemming from the ongoing the COVID-19 pandemic.
Another concern is that WU.com use compares more to the habits of Venmo or Zelle users than those of families sending money around the globe.
"WU.com has the potential to someday serve as the centerpiece of a cross-border consumer ecosystem in the future," Western Union CEO Hikmet Ersek said Wednesday during the fourth-quarter earnings call. "Right now, WU.com users are sending money to others or paying bills, but it is a unique platform for adding services to."
The Denver-based company’s fourth quarter revenue of $1.3 billion declined 3% compared to the prior year period, or 1% on a constant currency basis. The company reported the revenue figures included a 1% benefit from inflation in Argentina. Its net income was $177 million in the quarter, up 31% from $135 million in the fourth quarter of 2019.
The success of WU.com for digital money transfers sets the stage for when the pandemic eases and the company can open its agent locations across the globe. Digital money transfers, 80% of which were initiated through a mobile device, accounted for 21% of Western Union's consumer-to-consumer transactions in the quarter.
The long-term plan is to build WU.com into an ecosystem that would include services like banking, financial and others that customers would find helpful, Ersek noted. The website had a 49% uptick in users in the fourth quarter compared to last year. This growth could help deliver $1 billion in overall revenue in 2021, Ersek said.
The company is forecasting an earnings-per-share range between $2 and $2.10 in the coming year and an operating profit margin of approximately 21.5%.
The company also plans to grow its physical locations.
"We continue to improve the quality and coverage of our network," Ersek said, noting the company added 100 new agents globally with "the potential of 20,000 new locations."
Western Union filled a gap in its North America service map through a deal with Walmart in the U.S. to complement its similar arrangements with Walmart in Canada and Mexico.
The remittance company is also working to trim costs over the course of the pandemic, and has already reached $100 million in operational cost savings, while adding another $53 million saved by renegotiating contracts with partners and vendors during the year.
Retail business for Western Union will remain volatile during 2021 as countries continue to address pandemic fallout at the same time they roll out vaccine programs, said Raj Agrawal, executive vice president and chief financial officer.
"Q1 will be the softest, but because we had the lowest Q2 last year, that quarter will probably be the highest for us," Agrawal said. "It should be much more stable in the third and fourth quarters, but it should get growth for the full year."
Because WU.com had such strong quarters to end 2020, it is likely the momentum will spill over into the first quarter of 2021, Agrawal added. "I don't see the retail and digital pieces converging, but certainly more normalizing versus what they did last year."
