The news: Western Union’s revenues dropped 1% YoY on both a reported and adjusted annualized basis, per its Q2 earnings release. 

• Consumer Money Transfer revenues fell 2% YoY.
• Consumer Services revenues grew 4% YoY.
• Branded Digital revenues increased 7% YoY.

Inside the results: Western Union didn’t experience the anticipated turnaround in its Americas retail business, and the delayed close of the company’s $500 million Intermex acquisition also weighed on results. To combat margin pressure, CEO Devin McGranahan emphasized Western Union’s commitment to invest in digital products and consumer services, while CFO Matt Gagwin outlined a plan to reduce operating costs by $50 million by year’s end. 

Zoom out: Western Union’s difficulties reflect broader remittance trends. We forecast that Latin America remittance inflow will reach $175.6 billion this year, the second-largest total of any region behind Asia-Pacific. However, this still represents a significant reduction in growth: Latin America ranks fourth among regions with remittance growth at 2%—nearly a third of the growth rate  two years ago. Stricter US immigration policies targeting Latin American migrants have contributed to weaker demand for remittance products.

What’s more, the remittance industry is undergoing  a period of disruption. Crypto, or specifically stablecoins, has the potential to upend the legacy business by making cross-border payments to loved ones programmable, faster, cheaper, and available 24/7. Fintechs have moved to provide these services to customers traditionally served by incumbents like Western Union and MoneyGram, raising the pressure to innovate quickly. Western Union has responded with the launch of its own stablecoin to power crypto remittances.

Implications for remittance providers: McGranahan highlighted one key takeaway on the earnings call, noting that as the retail business has declined, “competitive intensity in the digital business has increased.” To secure digital business, remittance providers will need to invest in marketing and incentives to increase brand awareness and lure customers. Legacy providers have the opportunity to convert their history of trust into  digital adoption, if they can persuade consumers to move from retail locations to digital  platforms.

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