Western Union's digital growth is a bright spot (WU)

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Western Union posted a tepid 2% increase in revenue on a constant currency basis in Q2 2017. This growth was led by transactions in Latin America, North America, and Europe, but was partially offset by declines from oil producing countries in the Middle East and Africa. Even so, its digital offerings remained a bright spot. 

The remittances industry is in the middle of a digital transformation, and Western Union’s results show the firm is on the right track.

• Westernunion.com, Western Union's digital payments segment, continued to show positive growth. Western Union's digital consumer-to-consumer (C2C) revenue increased by 23% year-over-year (YoY) on a constant currency basis, with transactions rising by 25%. This is significant when considering the fact that total C2C revenue actually fell by 1% YoY and transactions only increased by 3%. 
• Western Union needs to not only continue investing in its digital channels, but it should also look for partnerships or acquisitions in order stave off potential threats. CEO Hikmet Ersek briefly touched on this during the firm's earnings call, stating that the company plans to focus on expanding westernunion.com beyond the 40 countries it operates in - with an emphasis on mobile - and seeking out digital partnerships. These could be similar to PayPal’s acquisition of digital-first remittances startup Xoom, or through tech partnerships like the one Western Union itself announced in April with Apple Pay.

Western Union needs to continue to see strong performance from its digital C2C segment if it wants to stay ahead of the competition. MoneyGram, one of Western Unions rival legacy-competitors, is poised to become a much larger digital threat. Ant Financial, the owner of Chinese payment platform Alipay, is on the verge of acquiring MoneyGram. If this purchase is allowed to go through by US regulators, it would mean MoneyGram would have access to Alipay, China's most popular mobile wallet with over 450 million users. This would be “transformational” for MoneyGram as it would be coupling its massive physical network, which consists of 30,000 locations in the US alone, and Alipay’s global digital presence.

Ayoub Aouad, research analyst for BI Intelligence, Business Insider's premium research service, had put together a detailed report on digital remittance that:

• Quantifies how large the remittance market currently is. 
• Discusses what some of the barriers to growth have been for the remittance industry in recent years. 
• Identifies what factors are going to lead to continued growth going forward.
• Considers ways digital-first startups have begun to disrupt traditional remittance companies and bring down fees. 
• Breaks down what legacy firms are doing to hold off these challengers, while also evolving with the changing technological trends occurring globally. 
• Explores what firms in the industry will have to do going forward in order to avoid being outperformed in an industry that is becoming increasingly saturated. 

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