The cross-border payments market had traditionally been a battleground between MoneyGram and Western Union. But today, there are dozens of competitors, providing more ways than ever for consumers to move funds between countries.
To stay relevant, MoneyGram CEO Alex Holmes said the company, which is more than 80 years old, is adding to its digital currency game while not letting go of its brick-and-mortar network, something the digital upstarts do not have.
MoneyGram plans to expand its blockchain and crypto service in the coming months to take advantage of the continued appetite for cheaper international transfers. The firm is also streamlining how it tailors its services locally based on the mix of cash and digital payments in specific markets, and is expanding its reach into new demographics.
"We're looking at ways to differentiate ourselves. That doesn't just mean differentiation from competition. It's more about building a product that can reach different places that have different needs," Holmes said in an interview.
Both MoneyGram and
Given the uncertain economic outlook and higher interest rates, money transfer businesses like Western Union or MoneyGram will face more intense competition in 2024, according to Meng Liu, a senior analyst at Forrester.
"Cross-border payment innovations are moving to the next phase," said Liu, noting that innovations such as QR code-based schemes that allow for cross-border interoperability have
And the large market of P2P apps isn't going anywhere, according to Liu.
"Though each of these fintechs have a unique focus area, they have some overlapped business, which increases competition," Liu said.
A cause for crypto
One of MoneyGram's largest near-term products, which it expects to launch in early 2024, is a noncustodial crypto wallet on the Stellar blockchain network. A noncustodial wallet enables users to maintain sole control over the assets, such as a cryptocurrency, stablecoin or traditional currency. That potentially gives the user more flexibility over when they send funds.
The wallet will support instant payments and transfers between digital currencies and traditional money, and will not charge fees until June.
MoneyGram has offered crypto cashout services for about two years through partnerships. In 2021, it partnered with crypto exchange
MoneyGram's new crypto wallet could serve as an alternative to Ripple, which uses the technology that supports the XRP token to enable cross-border payments with faster processing times and less costs than using third parties to handle currency exchange and compliance. MoneyGram will offer access to cross-border payments compliance in addition to the wallet.
"The custodial wallet gives us an opportunity to expand crypto service with our core demographic, and change how consumers can move funds across borders," Holmes said.
There is also competition in digital assets. Singapore and China are piloting the digital yuan for tourism payments, and
"We will see more usage of either CBDCs or stablecoins in 2024 for cross-border payments," Forrester's Liu said.
In other moves, MoneyGram recently
"There has been a lot of experimentation and ideation about how to create a different way to enable people to send money back home," Holmes said, adding that the use of a blockchain or a stablecoin wallet to store funds enables people to better manage currency fluctuations.
MoneyGram is also addressing its digital strategy on a local level, with a goal of determining how its mix of brick and mortar agents and digital products match how local populations have embraced advancements such as mobile wallets.
"Someone sending money from Saudi Arabia to the Philippines has different needs than someone sending money to Mexico," Holmes said. "The consumer in Mexico doesn't care what's happening in that other market."
For example, in Poland, 56% of consumers in 2022 had only used physical methods for P2P payments, according to
"There's a tendency to want to be all things for all people, but you have to customize to ensure relevancy," Holmes said.
As such, there is a need to balance digital channels such as mobile wallets with maintaining an agent network, Holmes said. MoneyGram operates in more than 200 countries and territories, and has about 400,000 agent locations.
"We will maintain our network as much as humanly possible," Holmes said. "A lot of our countries are both 'send' and 'receive' countries so having an agent location is not as hard to maintain financially."
A costly business
MoneyGram was on the market for a potential acquisition for about six years during the 2010s, with a potential deal for
That has led MoneyGram to examine large parts of its business, expanding its focus on a larger addressable market, including targeting higher end consumers and businesses that have cross-border payment needs. "We're also going to look at products outside of traditional payment streams," Holmes said. This plan will cover items such as account services and security and a revamp of its online channels, he said.
MoneyGram and its competitors are chasing a remittance market that has remained relatively strong in a tighter economy, but is slowing. There will be about $858 billion in global remittances in 2024, up from about $840 billion in 2023, according to
"There is still a lot of uncertainty. Interest rates will come down but will still be higher than where they were," Holmes said. "When you talk about inflation and interest rates, that creates pressure."
And while digital payments can cut into overhead, cross-border transfers are still costly. The average cost of a $200 remittance is about $12, according to the
"This is an expensive business," Holmes said. "You generally pay out the transaction before getting the money on the front end … and we have to wait for the card networks to settle with us overnight. So you need capital to run this business."
That expense will put more pressure on the payments market in an economic slowdown, which Holmes contends his firm is prepared to navigate as an incumbent company that is diversifying.
"There was this accelerated growth of all things digital from the mid-teen years to the early 20s," Holmes said of the period of very low interest rates, which made it easy for startups to attract funding.
"Everyone's boats lifted from that," Holmes said. "When capital is free, it's easy to expand in this business."
