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Western Union Makes Offer to Acquire Cross-Border Payments Firm MoneyGram

Financial giant, Western Union is in discussions to acquire cross-border payments company MoneyGram according to a June 1 article by Bloomberg.

Western Union Co. is seeking to acquire MoneyGram International Inc. in a transaction that would bring together two of the largest US providers of cross-border payments. The news comes via an anonymous Bloomberg source, who the publication cannot identify as the matter has not been made public – according to the source familiar with the matter.

Officials representatives from both companies have declined to comment on Western Union’s alleged takeover offer for cross-border payments company MoneyGram.

COVID Climate and FinTech Competitors

MoneyGram’s business has been in decline as more and more people lean towards online payments. Financial Technology (FinTech) payment services are now offering solid competition to the established cross-border payments companies and policymakers are intent on bringing down fees associated with moving money around the world.

The onset of the coronavirus pandemic disruption has put MoneyGram under further duress and the cross-border payments company has been forced to close many of its operations around the globe.

Earlier this year, Ripple made an initial investment of $30 million in MoneyGram equity at the same time that it signed the commercial agreement with MoneyGram for cross-border settlement using digital assets. After this most recent $20 million investment, Ripple now owns 9.95 percent of the outstanding common stock of MoneyGram, and approximately 15 percent on a fully-diluted basis including non-voting warrants held by Ripple.

The deal seemed to be motivated by the FinTech competition and online trends of consumers during COVID, MoneyGram attempted to boost its digital remittance services but according to their first quarter report for 2020, digital cross-border remittance only made up just under 20% of their business.

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Western Union Counts its Losses in Advance as El Salvador Bitcoin Era Begins

Western Union and the majority of money service providers operating in El Salvador may lose their grip in the country as the new Bitcoin era becomes entrenched.

CNBC reported, citing El Salvadorans living in the diaspora, there is an excitement about the potential reduction in remittance fees being passed on by companies like Western Union onto their customers.

Remittance is a vital means of sustenance to the El Salvador economy, with over $6 billion recorded in 2020. This figure accounted for about 23% of the country’s gross domestic product. A considerable part of this remittance funds was borne as fees paid to companies like Western Union. Atop a transaction fee of about 12.5% and the inconvenience that comes with using traditional payment services, most El Salvador citizens are now excited for the alternative being provided by Bitcoin.

“Remittances are one area where the status quo in our legacy financial system is terrible, with extraordinarily high fees levelled at populations that can ill afford them,” said Matt Hougan, Chief Investment Officer of Bitwise Asset Management. “It’s a worn-out Twitter saying, but bitcoin really does fix this.”

President Nayib Bukele said money service businesses generate as much as $400 million in revenues from remittance payments. This revenue source is bound to be blocked in favour of the final consumers.

The government has introduced many initiatives to give its Bitcoin plans a soft landing amongst the populace. Besides installing about 200 ATMs in strategic parts of the country, a Chivo wallet that charges no transactions fees has also been introduced for the populace to transact. The transaction flow will be as simple as receiving Bitcoin through the Chivo wallet and proceeding to the nearest Bitcoin ATM to withdraw in US Dollars.

While the potentials succour the Bitcoin for remittance option is set to offer, the government has an obligation to allay all fears and market its proposed app to the public, offering, amongst other things, the assurance of data safety.

Trademark Applications Show Western Union Entering Crypto Space

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Remittance giant Western Union has filed several crypto-related trademark applications with the U.S. Patent and Trademark Office. Trademark attorney Mike Kondoudis revealed that matter on Tuesday via Twitter social media platform.

The applications made by the U.S.-based money transfer firm mean that the company intends to launch its own digital currency exchange and cryptocurrency token. The financial services firm also has plans to expand into managing and administering digital assets and related financial instruments.

Although, for now, Western Union is showing some ambitiousness in terms of making a foray into the crypto landscape, the firm has been relatively cautious about entering the space.

In 2018, the money transfer service company was against plans to include crypto in its transfer business, citing low adoption of cryptocurrencies by its customers. But things changed, and in 2019, former Western Union president Odilon Almeida announced that the company was ready to add digital assets to the list of currencies on its list of operations.

In April 2019, Western Union partnered with blockchain-based financial services company Coins.ph to allow its five million customers in the Philippines to receive international and domestic money transfers directly into their mobile wallets. But all these plans did not come to fruition, including its plans to acquire cross-border payments firm MoneyGram.

According to statistics, Western Union has been operating in the cross-border payments space for almost 150 years, and currently, it serves almost 150 million customers worldwide.

In recent years, several fintech startups have emerged to challenge Western Union’s cross-border platform in the massive space — from WorldRemit, Remitly, to Wise (formerly TransferWise). But the payments giant seems up for the task and has been investing heavily in its digital operations in bids to defeat fintech at its own game.

But increased competition in the international money transfer space and the growing adoption of blockchain technology appears to push Western Union into crypto markets finally.