MoneyGram International Inc. is developing a prepaid card and is also working on a service for sending cash directly into a bank account abroad rather than to a MoneyGram agent.
The transmitter says both will become available by midyear. The prepaid card, carrying the MasterCard brand, will not be used for remittances at first but will be at some point, MoneyGram says.
Another eventual goal is to combine the forthcoming Directed Sends service with one MoneyGram already offers.
eMoney Transfer, which was introduced last year, allows customers in the United States to transfer funds online from a bank account or credit card. Currently, eMoney recipients at MoneyGram agent locations abroad can only pick up cash. Linking the services would let money be transferred from one bank account to another.
Tony Ryan, MoneyGram’s vice president of global funds transfers, said the “key constituencies” for these products are immigrants, for whom the company wants to become a one-stop shop, and “people without bank accounts who need to pay their bills.”
First Data Corp.’s Western Union already offers a prepaid MasterCard as well as online money transfers. Analysts say bank versions of these products have mostly been lackluster and that banks will not gain share in remittances unless they start tailoring their offerings to immigrants.
Western Union has roughly a 13% share of the market and MoneyGram about 3%, according to Aite Group LLC in Boston. Banks and credit unions as a whole have about 5% of the market, according to Celent Communications LLC.
Celent, also of Boston, predicts that by 2007, 42% of immigrant households will do some online banking, versus 32% this year, and that at least half this number will use an online or card service to send money. Dan Schatt, a senior analyst at the research firm, said banks have 12 to 18 months to win over this group from the traditional money senders.
Bank of America Corp. has gained traction with SafeSend, a prepaid card for sending money to Mexico, and has used the 3-year-old product to cross-sell others. Roughly 60% of new SafeSend accounts are opened with new demand deposit accounts, while 35% come from existing B of A customers, according to Celent.
Yet traditional money transmitters say banks pose little threat to them.
“We think of banks as an opportunity,” MoneyGram president and chief executive Phillip Milne said at an investor conference two weeks ago. “Banks are going to have to partner with us. If we can roll out the models, they will be an ideal distribution mechanism.” His company has partnerships with its Minneapolis neighbor, U.S. Bancorp, and with UnionBancorp Inc. of Ottawa, Ill.
The decline of exclusive agent relationships, which have been an important advantage for Western Union and MoneyGram, creates an opening for the banks. According to Celent, half of the traditional agents who have exclusive relationships will no longer accept exclusivity in the next five years. Ten percent of Western Union’s receiving agent network is already no longer exclusive, Celent says.
One reason traditional senders such as MoneyGram have not offered new remittance products until now may be that having customers use automated teller machines and the Internet could have undercut their agents’ business, analysts said.
But Mr. Ryan said MoneyGram’s online, card, and Directed Sends services complement its traditional service. “The more capabilities we have on the send side, the more advantages we create for the receiving end, and vice versa,” he said.
