Western Union Co. said the difficulties in its U.S.-to-Mexico remittance business have recently been compounded by the housing market bust and a change in immigration patterns.
Many of the Englewood, Colo., money transmitter's customers work in construction, which has suffered from the real estate downturn. Christina Gold, Western Union's chief executive, said Thursday on the company's fourth-quarter earnings call that it has also "seen shifts in terms of customers, where they are. Some have gone to Canada; some have gone to Europe. I think that's why we feel we're being very tempered in terms of our prognosis for domestic [volume] in 2008."
Mexico, which was previously the second-largest destination for Western Union remittances after India, fell to third place behind China during the quarter, she said.
The company's domestic transactions, which include remittances originated in the United States and sent abroad, declined 3% during the quarter, while revenue from such transactions fell 9%. The growth of domestic transactions had been slowing since late 2006, when the debate over immigration policy sparked customer fears about deportation and money seizures.
Remittances outside the U.S. grew 28% and accounted for more than half of Western Union's revenue for the period. This year, the company said, it plans to expand its branch network abroad, where David Scharf, an analyst with JMP Securities LLC, said there are "tremendous growth opportunities," though lower margins.
Ms. Gold said Western Union is trying to drive more business to its Web site by improving technology and working with banks to process more online transactions, which they have been slow to accept because of concerns about fraud. The Web site contributes only 2% of transactions, and applications are "a little bit cumbersome" to fill out, she said, but the channel "can be much bigger than" it is now.
Western Union's fourth-quarter profit rose 12% from a year earlier, to $243.3 million, or 32 cents a share.
