Western Union is one of the best-known and most successful financial services around the world, and many believed that this would never change. However, Western Union has started experiencing quite a bit issues recently, which might indicate that it is time for the company to change its mindset. And apparently, get on board with blockchain solutions such as Ripple, as MoneyGram did.
Western Union sees lower earnings in Q2 2019
Many among you may or may not know that Western Union trialed Ripple in the past, too. But they decided to move along without carrying any substantial tests.
So now, one of the biggest and most impacting changes is the drop in its stock price after a reported miss on earnings. Its new earnings per share (EPS) came in at $0.45 per each share. Previously, analysts had predicted that the earnings would be somewhat higher, at $0.48 per share. While nowhere near the predicted EPS, it is even lower than the earnings from last year, when the EPS stood at $0.46 per share.
On the other hand, Western Union’s net income in the Q2 2019 was at $614.8 million, which translates to $1.42 per share. Last year, however, the figures were significantly lower, sitting at $217.6 million, or only $0.47 per share.
However, there were significant drops in revenue reported in the Q2 of this year, with revenue coming in at only $1,34 billion. While this is a considerable sum, it is below the last year’s revenue during the same period, which was at $1.41 billion.
That is not all; Western Union’s C2C (Consumer-to-Consumer) revenues made 83% of the total revenue in the second quarter, which is still 1% below the reported basis. This comes despite the fact that transactions actually grew by 1%.
The strongest growth for the US-based financial services company (Western Union) that keeps ignoring to adapt the change (Ripple blockchain) with era came in Latin America, which helped offset the declines recorded in the US domestic market and the Asia Pacific region.
Meanwhile, Western Union’s C2C revenues increased, even going as high as 18% above the reported basis. This translates to 20% constant currency, while transactions went up by 15%. It should also be pointed out that Western Union represents 13% of the total C2C revenue, and that it is currently serving 70 nations around the world.
It is not so bad for all the WU branches, however, and Western Union Business Solutions revenue actually went up by 3% above the reported basis. This is also a 7% improvement on a constant currency basis. This is something that was driven the strongest in Australia and Europe.
#MoneyGram is currently number 2 in the world for money transfers but after they fully implement and launch #xRapid with #XRP then I am expecting them to be the number one money transfer service in the world after they take over Western Union’s place
— XRPcryptowolf (@XRPcryptowolf) August 6, 2019
Hikmet Ersek, the CEO and President of Western Union commented on the results, stating that they were stable for the second quarter, and saw strong growth, at least as far as the digital sector goes. Further, he pointed out that the results in international digital transactions were particularly impressive. Western Union also managed to attract more of the leading global brands with their unique capabilities, and they still remain on track when it comes to delivering on their 2019 outlook.
Western Union brings changes — but are they enough?
So, why did Western Union saw such a significant drop in their earnings? Many believe that it might simply be due to the change of the methods used for sending payments. The people are getting used to having faster transaction speeds and lower fees; thanks to new systems, delivered by the cryptocurrency sector, Ripple in major.
One interesting situation is that of Moneygram, which did exactly that — it partnered up with Ripple, and has already started using the blockchain firm’s products to speed up transactions and cut back on the fees.
As a result, more people started employing its services, and many of the newcomers are likely former Western Union customers. This indicates that Western Union might have to change its ways soon if the leading financial services firm wants to remain ahead of everyone in the race. The world of finances is changing, rapidly, and WU must find a way to adapt or continue seeing losses in quarters and years to come.
The company is already experiencing quite negative consequences, as its biggest news of the quarter was the announcement of the workforce reduction. The company will have to let go around 10% of its workers.
Western Union announced job cuts, claiming that they are a part of its new global strategy that is supposed to improve efficiency, bring long-term revenue growth, and increase profitability. As for its plans for the future, the company seems to be encouraged by its cross-border money movement results, and so it plans to focus especially on its solutions and products in this area. But yes, it hasn’t confirmed any shift towards Ripple yet.
Ersek added that the firm is very excited about changing strategy, and they plan to start implementing changes as soon as possible. He stressed that the changes are being made from a position of strength and that they represent only the first step of a larger plan.
And, while the changes in the structure are supposed to bring a decrease in cost structure, it appears that the company has lowered its earnings expectations for the year. Previously, it expected to see prices of $2.66 to $2.76 per share, which was now reduced to $2.47 to $2.57. Meanwhile, the earnings per share were adjusted as well, moving to $1.70 to $1.80.
Consequently, change is what every business in the world needs to stay right on the top. It’s evident that if Western Union wishes to remain the number money transfer company, it will need to embrace the change. What change? We hear you ask — that’s Ripple.
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