MoneyGram (MGI) recently teamed with foreign currency exchange bank, CI Banco, to extend its send and receive services to 128 additional locations in Mexico. Apart from Mexico City, these services will also be available at other popular tourist locations in Mexico.
With the growing demand for money transfer services in Mexico, the alliance with MoneyGram will help CI Banco to further expand its services in the Mexican market and emerge as the second largest send agent in Mexico. Conversely, MoneyGram will also benefit from the reputation and the network coverage of CI Banco to further widen its services in the Mexican market.
We believe that such alliances with big names in Mexico are prudent on the company’s part. Mexico is becoming a booming market for money transfer services as the number of tourists visiting the country almost doubled over the last decade. Mexico is the world’s third largest recipient of money transfers and received transfers worth approximately $23 billion in 2010.
MoneyGram has always remained focused on expanding its money transfer services across the globe. MoneyGram recently ventured into the UK market with its online money transfer services.
Prior to first-quarter end, MoneyGram announced a multi-year alliance with Latin America-based Grupo Elektra, SAB de CV to expand its money transfer services in Mexico. This alliance resulted in an increase in the company’s network coverage by 10%.
Over the past couple of weeks, MoneyGram has struck deals with two of the five leading foreign currency exchanges – Casa de Cambio Angulo Lopez and Venegiros Casa de Cambio for extending its money transfer network to Venezuela, and has also partnered with the State Bank of India to increase its presence in the Indian sub-continent.
MoneyGram’s strategic initiatives will help it attain competitive edge, particularly against the steady global growth of its arch-rival Western Union Co. (WU), which has recently extended its account-based money transfer services to Canada. By virtue of MoneyGram’s expansion spree, we expect the company to explore new growth avenues in unchartered territories by incorporating latest and flexible technology that facilitates transfers through mobile phones, prepaid cards or ATMs, in order to speed up its money transfer services and enhance remittance volumes.
We retain our long term Neutral recommendation on MoneyGram. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the stock over the near term.
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