MoneyGram International, Inc. MGI has tied up with E9Pay, one of the largest money transfer and payment fintech companies in Korea. Per the partnership E9Pay, customers will be able to utilize MoneyGram platform and distribution network which spans more than 200 countries and territories.
This new facility will be much beneficial to consumers who send money between Southeast Asia, Russia, and the Commonwealth of Independent States (CIS), which are the main corridors for E9Pay. Customers will also have access to MoneyGram’s account deposit services.
E9Pay is best suited for MoneyGram, to expand in Korea, given the former’s loyal base of avid customers.
MoneyGram already has a presence in Korea given its partnership with Woori Bank, Shinhan Bank, Korea Post, Kyongnam Bank, and Sentbe.
Via these tieups MoneyGram is eying the Korean remittance market worth approximately $13.4 billion in annual remittance outflows, per the World Bank.
This partnership is going to be truly beneficial for MoneyGram given its account deposit facility which should be in great demand in the ongoing pandemic situation, wherein customers wants money transfer facility within the safety of their homes.
E9Pay utilized MoneyGram’s API-driven infrastructure to enable a quick and seamless integration. This partnership signifies the company’s efforts to continue to expand its digital services.
Last week, MoneyGram reported that it has clocked 81% growth for its digital business in April – an increase from 57% transaction growth recorded in the first quarter of 2020. These strong trends have also continued into May.
The company has been making concerted efforts to develop and build its digital money remittance platform, like a fintech startup, which generates more profitability than its brick and mortar business.
Nevertheless, the company has been losing on its profitability and has sustained losses in three quarters in a row. MoneyGram’s total revenues have been declining since 2017 through the first quarter of 2020.
Revenues have been impacted by a deliberate strategy of increasing compliance control and imposing limits on certain transactions. Moreover, the U.S.-to-U.S. market continues to be challenging with an increasingly aggressive market pricing and a number of new competitors.
Total revenues in the first quarter of 2020 further declined, led by pandemic spread and government issued shelter in place orders. This caused a decline in the company’s walk-in business.
Also high compliance requirements, investment in business has caused costs to rise over the years causing margin erosion.
The company is suffering on both the sides, revenues as well as costs, and has been trying to grow its business, as well as rein in costs, to survive.
In this vein. the company recently entered into a number of partnership such as Ebix, to expand its retail distribution coverage in India, launched services with Etisalat, e-Wallet in UAE, Lulu Financial Holdings across key markets in the Middle East and Asia, and Al Rajhi Bank in Saudi Arabia to strengthen its leading position in that market.
However, we believe the path to profitability will be tough to achieve, given the rough economic environment and an anticipated shrinkage of the global remittance market in 2020. At the end of April the World Bank issued a forecast projecting a 20% decline for global remittances in 2020. Current forecast for 2020 global remittances vary anywhere from declines of 3.5% to 20%.
Year to date, the stock of MoneyGram declined 8.6%, compared with the industry’s decline of 22.9%.
The stock carries a Zacks Rank #4 (Sell). Some better-ranked stock in the same space are Virtu Financial Inc. VIRT, Oaktree Specialty Lending Corp. OCSL and PJT Partners Inc. PJT. While Virtu Financial sports a Zacks Rank #1 (Strong Buy), both Oaktree Specialty and PJT Partners carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Virtu Financial and Oaktree Specialty beat estimates in the last reported quarter by 35.76% and 60%,
Per the Zacks Consensus Estimate, PJT Partners current year’s earnings are expected to increase 2.9%.
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