Wal-Mart, MoneyGram and Western Union — Why It is Never Good to be Stuck in the Middle

When reading Wal-Mart’s recent announcement about its deeper dive into banking (Wal-Mart Dives Deeper in Banking, The Wall Street Journal, Friday April 18, 2014), a few points jumped out at me that centered on the rapid segmentation of the money transfer market and why companies like MoneyGram should get out of the way of that moving truck.
Wal-Mart announced that it was rolling out a money transfer service that allowed customers to use its physical locations for person-to-person money transfers. Given its huge footprint, Wal-Mart can offer a robust network for its customers to remit funds to each other around the country.
Wal-Mart also has long standing relations with traditional money transfer giants MoneyGram and Western Union. The new Wal-Mart service directly competes with their partners’ offerings and is being offered at a significant discount to customers.
For Western Union, this is less of an issue as US domestic money transfers represented only 8% of Western Union’s business in 2013. For MoneyGram, however, almost 27% of their 2013 revenues came from Wal-Mart money transfer outlets.
In addition to Wal-Mart’s efforts, PayPal, Apple, Square, Amazon, and others are grabbing share in the payments sector. Domestically there is an acceleration in the use of these platforms as this market is seen as low hanging fruit.
Both MoneyGram and Western Union are rapidly trying to not get stuck in the middle of the rapid market evolution that is taking place. Western Union (hereafter referred to as WU.com) has truly moved to globally expand its business and is rapidly innovating its product mix to accommodate the bigger growing market for international remittances. MoneyGram, however, is trapped in the domestic market with challenges to its international growth innovation strategy.
When you see your traditional strong markets under attack and your offering is considered a commodity then it is best to creatively disrupt your business and go do something that is harder and generates more value. International payment remittance offers that to MoneyGram, and there is plenty of technology and market know-how to be created and deployed there.
Being stuck in the middle is only fun when you are with a loved one.