In an attempt to make its foray into the UAE, Western Union Co. (WU) , a leader in global payment services, yesterday, announced its tie up with Emirates NBD, a leading regional bank. 

As per the agreement, Western Union will offer its Account-Based Money Transfer service to the account holders of Emirates NBD. Under this service, consumers will be able to debit their bank account and send the money through Western Union via online portal for pay-out at an agent location. They can also avail other channels, such as  mobile and ATMs. Emirates NBD has more than 700 ATMs throughout the UAE.

Western Union has traditionally focused on its physical agent provider network. But, with increasing competitive threats from electronic money transfer modes, it has been compelled to grow its new-age technology channels – WesternUnion.com, account-to-cash, mobile and pre-paid cards, for money transfer.

As of the year-end December 2010, Western Union had agreements with 40 banks in place to offer account-based money transfer through their online banking portals. The account based money transfer witnessed a 40% transaction growth in 2010.

With respect to Mobile Money Transfer, Western Union has 14 agreements in place with mobile network operators and banks. The company has enabled over 80,000 of its agent locations across 48 countries to provide cash through mobile service. Its WesternUnion.com, which allows consumers to send funds online, has also been expanded to 20 countries.

Although Western Union is aggressively seeking channels to offset the decline in traditional money transfer, we believe that the transition to these newer technologies will be more evolutionary than immediate. The new-age electronic channels, which represented 2% of the total company revenues for FY10, will expectedly increase their contribution to 3% in FY11.

Western Union competes with MoneyGram International Inc. (MGI) based in Minneapolis, Minnesota. The stock carries a Zacks #3 Rank, which translates into a “Hold” recommendation over the short term. Further, over the medium-to-long term, we suggest the investors to maintain a “Neutral” position.

 
MONEYGRAM INTL (MGI): Free Stock Analysis Report
 
WESTERN UNION (WU): Free Stock Analysis Report
 
Zacks Investment Research