Coronavirus is causing widespread panic and could impact MoneyGram’s business.
The coronavirus has caused widespread panic, sent stocks plummeting and forced businesses including Microsoft and Apple to warn for the current quarter.
For MoneyGram the epidemic is both a blessing and a curse. The cross border payments company hasn’t seen any impact to its business yet, given its low exposure to international markets, but that doesn’t mean it isn’t keeping a watchful eye on how it spreads in the U.S.
If people aren’t able to move freely in their environments, migration for work is restricted and travel is prohibited it could negatively impact MoneyGram’s outlook. “We’re fortunate to have invested quite substantially in the last couple of years into our digital business. Today 22% of revenue is being generated from digital type transactions and partnerships. That being said the rest of the business is reliant on global walk-ins,” said Alex Holmes, MoneyGram’s Chairman and CEO.
Those store locations where people send and receive money around the globe is where the coronavirus risk lies. As more people are quarantined or stay home out of fear of catching the virus, the less business MoneyGram will do from walk-ins. It’s a business that has been on the decline recently as MoneyGram faces competition from less stringent players. In an effort to reduce fraud and enhance compliance MoneyGram requires ID for every transaction starting at $1.00 despite the fact that most other services require ID only when the transaction is for $900 or more. It’s also poured money into modernizing its back-office functions. Those steps to increase compliance and reduce fraud have hurt its revenue. “Growth in the walk-in space is a challenge for us,” Holmes. For its fourth quarter, MoneyGram reported a 6% decline in revenue, due largely to a 6% decline in money transfer revenue.
But that’s where the blessing from coronavirus comes in. MoneyGram has been in the midst of a digital transformation, pouring money into making transactions more secure and innovating for the cross border payments market. Earlier this month it launched MoneyGram FastSend, a new payment service through which consumers can send money to a person’s mobile phone number via the MoneyGram website and mobile app. MoneyGram charges a flat rate fee of $1.99 per transaction and enables customers to send up to $10,000 in cross border digital payments. MoneyGram claims the new service, which is supported by the Visa Direct rails, enables the industry’s fastest transaction times with customers sending and receiving money in a couple of clicks.
“FastSend has been in the market for about two weeks and it’s taking off tremendously quickly,” said Holmes. “Our vision is to be a leader in cross border P2P and FastSend enables us to be the first company to use it for cross border payments.”
That business may get a boost because of the virus. It’s hard to tell if it’s already happening since digital payments is growing rapidly, up 114% internationally and 50% in the U.S. during the fourth quarter. The majority of the transactions are coming from new customers who are using their mobile phones. It’s not overlapping with the walk-in customers. If they are afraid to go out and still need to send money, MoneyGram’s digital services could see a further uptick in business from its traditional customers. “When people are forced to use other solutions, it does bring a lot of change into the market,” the MoneyGram CEO said.