Yesterday, leading money transfer company, Western Union Co. (WU), announced that it would launch international money transfer services in Japan via Seven bank.
Seven Bank, a unit of Seven & I Holdings Co., will provide money transfer service through online banking, wherein funds will be transferred from accounts at the bank to pre-registered overseas accounts. The recipients will be able to withdraw money from any of the 400,000 Western Union locations worldwide.
Western Union will be able to access 15,000 Automated Teller Machines (ATMs) of Seven Bank, which spans major convenience stores in Japan. Though the money transfer service will be available from March 22, 2010, the customers will be able to use the ATMs from July onwards.
Western Union has been registered in Japan following the country’s new Financial Settlement Act in June 2009. This Act allows non-bank entities to carry out money transfer business in the region.
Western Union is trying to build on the huge demand for remittance services among approximately 2.2 million immigrant workers in Japan. With its ageing demography, Japan is getting increasingly dependent on foreign workers to fill the gap. Moreover, with the last recession reported to have ended in March 2009, the Japanese economy is steadily recovering, attracting people from around the world.
Western Union is aggressively making investments to combat competitive threats posed by these rapidly growing channels for money transfer. Its electronic channels include WesternUnion.com as well as account-to-cash and mobile money transfer services.
At year end 2010, Western Union had 40 banks, offering account-based money transfer through its online banking portals, and 14 agreements with mobile network operators and banks. It has enabled over 80,000 of its agent locations across 48 countries to help transfer cash through mobile service. WesterUnion.com, presently, allows consumers to transfer funds online in 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 total company revenues in 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
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