- Western Union are you looking to buy MoneyGram, reports Bloomberg
- Shares at the time the money transfer companies are soaring on the news of the
- Money transfer business risks of competition, payment of the fee cuts, COVID-19
Western Union, the largest and most recognized of the money mover in the world, has made a takeover offer for smaller rival MoneyGram, according to a new report from Bloomberg. The two companies provide money transfer services for individuals and businesses, and the investors are the blessing of the union by sending shares surging. Western Union stock is up 12% and MoneyGram shares are almost 50% higher. China’s Ant Financial Services Group had planned to buy a MoneyGram for $ 1.2 billion, but the deal was blocked in Jan. 2018 by the government of the UNITED states on national security grounds.
Traditional money transfer providers have been taken recently that the growth of cultures of fintech companies, such as the very successful TransferWise, cheap and easy online payments, and policy makers strive to reduce the cost of the transfer. Crypto projects such as Facebook Balance and its competitor, Celo may also pose a risk in the future. “We’re in the dial-up days of the internet money,” said Katie Haun, general partner at Andreessen Horowitz, who co-manages a $ 515 million fund to invest in cryptocurrencies and blockchain projects, to Bloomberg.
“We have seen an increase of competition in the money transfers sent and received in the united States on the part of competitors that do not charge a fee to send or receive money via bank accounts. The potential international expansion of these competitors could represent significant competition for us,” said Western Union in February 2020 10K SEC filing. He also listed the groups of consumers that can be considered migrants as people who are disadvantaged and entitled to protection as a risk. The global average cost for sending remittances has also been on the decline. It is now at 6.79%, down from 9.67% in the 1st quarter of 2009, according to The World Bank. The cost varies depending on the place where the money is sent to and the method. Banks are the most expensive suppliers, followed by the post offices and money transfer operators, mobile operators, being the least expensive.
Source: The World Bank.
Consumption and business activity has slowed and the physical locations were forced to close during the pandemic, impacting the money transfer business. The international remittances, something that Western Union calls “an integral part” of its business, are set to drop drastically this year, while the economies of the West experience a recession. Yesterday, Citi believes that the amount migrants send to their countries could fall by $ 100 billion in the worst case. The world Bank expects it to fall to 20% or $142 billion last year to $445 billion, the largest decrease since the records began in 1980.