MoneyGram's (MGI) Digital Platform Sees Consistent Growth

MoneyGram International, Inc. MGI recently announced that its online platform has been gaining from strong customer demand, driven by its digital capabilities. This upside led to robust digital transaction growth for the company in July.

As a case in point, the company witnessed digital transaction growth of 124% year over year in July. Strength of its direct-to-consumer channel—MoneyGram Online—digital partnerships, an increased account deposit and mobile wallet transactions primarily drove digital growth last month. The reported figure for the period is even higher than the record-breaking digital transaction growth of 106% in June.

MoneyGram’s online business has three major components, namely MoneyGram Online, digital partnerships  and account deposit and mobile wallet.

The first component (MoneyGram Online) delivered incredible year-over-year transaction growth of 126% in July. This was driven by cross-border transaction growth of 207% as strong adoption of the MoneyGram app continues to grow in the worldwide markets.

Expanding digital partnerships represent the second constituent of the company’s key strategies. Transaction growth from its digital partnership improved to an astounding 101%, up from year-over-year transaction growth of 97% in the second quarter.

Transactions from the third element—Account deposit and mobile wallet —skyrocketed 165% in July, up from 148% uptrend reported in the second quarter.

Following the COVID-19 outbreak, the company’s digital transactions gained further momentum as more customers opted for digital channels to make payments. This is clearly evident from MoneyGram’s digital business, which witnessed a year-over-year surge of 106% in the June quarter, reflecting a steady improvement from 57% growth reported in first-quarter 2020.

Moreover, a robust digital business bodes well for MoneyGram since its revenues have been declining since 2017 through first-half 2020. Revenues have been affected by a deliberate strategy of higher compliance control and imposition of restrictions on certain transactions. Total revenues in the second quarter declined further due to the prevalent pandemic and government-issued shelter-in-place orders, which weighed on the company’s business. Also, strict compliance and heavy investments in business shot up costs over the years, causing margin erosion.

Via its digital business, the company is entering new markets and continues to attract a completely new customer base.

The company began laying down the foundations of its digital transformation four years ago to prepare itself for the rapid changes brought about with the proliferation of technology in the remittance industry.

With several fintech players, such as PayPal Holdings, Inc. PYPL, Square Inc SQ and others offering similar services at very affordable rates, competition for MoneyGram naturally intensified over these years. Its close peer Western Union Co. WU is also facing the same ordeal and has been pursuing technological investments. 

Year to date, the stock has soared 74.3% against its industry’s decline of 10.4%.

MoneyGram carries a Zacks Rank #2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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