Global Money Transfers Can New Technologies Bring More Competition

1
Global Money TransfersCan New Technologies Bring
More Competition?

• Gwenn Bézard
• Celent Communications
• June 3 2004
• Shaping the Remittances Market by Shifting to
  Formal Systems 
• APEC - Tokyo, Japan

2
Agenda

• The market is fragmented
• Global money transmitters are strongly positioned
• New technologies offer greater opportunities for
  competition, but no magic bullet

3
The market for global remittances is fragmented

• Western Union, the leading global money
  transmitter has about 15 market share worldwide
• Beyond WU Moneygram, The market is made of
  ethnic money transmitters, credit unions, and
  banks. In the U.S. alone, there are about 150
  money transmitters.
• Though there is no shortage of competition,
  almost no player is ambitioning to compete
  directly with WU and MoneyGram on a global scale.
  
• Most money transmitters pursue one or a few
  ethnic markets
• Most banks are not interested in a global
  strategy
• Providers of financial services to the unbanked
  population (e.g. USA) see money transmitting just
  as one product among multiple others (e.g. check
  cashing, pay-day-loan, bill payment)

4
Global Money Transmitters are Strongly Positioned

• Western Union is definitely a success. Revenues
  from C2C money transfers have grown 30 annually
  between 2000 and 2003, from US1.5 billion to
  US2.3 billion. Operating profit margin is
  stable, around 30.
• Western Union is successful not just because it
  is the only game in town. As seen earlier, it
  faces numerous competitors.
• Western Union success is rooted into a very
  strong business model that combines
• Unmatched global network of 185,000 locations.
  (Citi 5,600 Wal-Mart 4,300 Fedex 11,400
  McDonalds 30,000)
• Brand US251 million in marketing advertising
  in 2002 (US216 million in 2001)
• Cash to Cash anywhere in the world.
• Real-time transfers
• Dedicated staff
• Partnerships
• North America agent locations 45 C-stores, 15
  check cashers, 40 other
• International agent locations 40 banks, 35
  post offices, 25 other
• Low cost deployment (1,000/location outside of
  North America)
• Not just about money transfers bill payments,
  pre-paid cards
• In short, its not just about price

5
New Technologies Offer Opportunity For Greater
Competition, But no Magic Bullet.
6
Conclusion

• New delivery channels and technologies (e.g. ATM,
  Pre-paid cards, Internet) are very likely to
  bring greater competition in the remittance
  market
• Some have already started to harness the
  potential (e.g. USA, Philippines, Spain,
  Dominican Republic)
• At this stage, new competition remains a local
  matter, however. There is no sign of competition
  trying to organize at a global level
• Most offerings are still immature.
• Moving forward, new financial services products
  are likely to be wrapped around the money
  transfer card (e.g. life insurance, health care,
  access to credit). The game will no longer be
  just about money transfers.

7
Questions?

• gbezard_at_celent.com
• 1.212.269.7518