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Why Western Union and MoneyGram Investors Shouldn't Panic

Percentage distribution of MoneyGram's total money transfer transactions for the years ended December 31.

 

2013

2012

2011

U.S. to U.S.

30 %

31%

32%

U.S. to Outbound

36 %

35%

35%

Originating outside of the U.S.

34 %

34%

33%

Source: MoneyGram

The table above shows that about 70% of MoneyGram's total transactions are either directed to go outside the U.S., or don't even originate from the U.S. at all, so there is nothing Walmart can influence. In addition, MoneyGram's dependence on U.S.-to-U.S. transactions has been on the decline, albeit growing its revenue. If the company can continue to do this, the entry of Walmart shouldn't pose any major problem.

The same thing applies to Western Union.

Consumer-to-Consumer revenue as a percentage of consolidated revenue

   

Europe and CIS

21%

22%

North America

19%

20%

Middle East and Africa

16%

15%

APAC

12%

12%

LACA

9%

9%

westernunion.com

3%

3%

Source: Western Union

As the table shows, Europe and CIS (Commonwealth of Independent States) contribute the most to Western Union's total revenue. Note that its Consumer-to-Consumer segment contributes about 80% of its total revenue. The beauty of Western Union's business is its extended reach. As the table shows, Western Union isn't over-reliant on any region. This could help neutralize the effect of Walmart's payment services.

So investors in these two companies need not panic.

At the time of publication the author had no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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