Western Union's Expansion Initiatives In Mexico Bear Fruit (Revised)

Western Union Co.’s (NYSE:WU) initiatives to expand in Mexico have yielded results as evident from its outperformance in the region.

The company is now capable of transferring funds from the United States directly to nearly all bank accounts in Mexico. The amount of money that customers have been sending through its three brands, namely, Vigo, Orlandi Valuta and Western Union has been exceeding the market for 12 consecutive quarters.

At the same time, transactions have grown for more than 11 consecutive quarters. During the same period, the Mexico market grew 5% on average in principal and 7% in transactions.

The company has been making efforts since the past many years to expand its reach in the region, which is the fourth largest recipient of remittances globally. According to data from Banco de Mexico, the region saw $24.8 billion in remittances in 2015, up 4.75% year over year. The region is expected to see a surge in remittance volumes going ahead due to its long tradition of international migration, with more than 13.2 million or 9.4% of its native population living overseas. Per the World Bank, Mexico–United States is the largest migration corridor in the world.

Western Union has been operating in the region for nearly two decades and in recent years has entered into tie-ups with banks, national retail chains and independent locations. In 2015, the company added 3200 agent locations in the region, bringing the number of agent locations to 13,600.

In the first quarter of 2016, the company benefited from strong growth in U.S. outbound to Mexico and Latin America with the Mexico business outpacing the market based on the latest findings by Banco de México.

Also, the Banco de Mexico data revealed that Western Union’s U.S.-to-Mexico transaction and principal growth outpaced the market in the first quarter 2016 due to the recent tie-ups. In Jan 2015, the company launched international direct-to-bank money transfers to Mexico from the United States via the Grupo Financiero Banorte’s UniTeller network, an International Money Payments Processor.

In Mar 2014, Western Union collaborated with Farmacias Guadalajara, a Mexican drugstore chain. This deal enabled Western Union to provide money transfer services in 1,100 drugstores and retail locations across Mexico.

Before that in Apr 2013, Western Union Company and Banorte, one of the largest financial institutions in Mexico, entered into a five-year agreement to offer Western Union global money transfer services.

The region accounts for around 10% of Western Union’s revenues as it is one of the major receive locations. Receive locations have large inbound remittance markets. Western Union, in conjunction with its Orlandi Valuta and Vigo brands, connects consumers in Mexico to more than 500,000 agent locations across 200 countries and territories worldwide. Although Mexico is an important location for Western Union, tougher immigration and money transfer standards in light of security concerns have, however, led to slowing growth in the U.S.-to-Mexico corridor.

The country’s vast remittance market has also caught the attention of another prominent player in the industry, Moneygram International, Inc. (NASDAQ:MGI) . The company offers its services in the Mexican market in partnership with Visa (NYSE:V) .

Western Union carries a Zacks Rank #3 (Hold). A better-ranked stock in this space is Total System Services, Inc. (NYSE:TSS) . The stock carries a Zacks Rank # 1 (Strong Buy).

(We are reissuing this article to correct a mistake. The original article, issued on June 22, 2016, should no longer be relied upon.)