Western Union has made two big digital plays in the past few days: a takeover offer for Australian foreign-exchange company OzForex, and a partnership with WeChat.
The 150-year-old company only gets about 5-6% of its revenue from online businesses, according to Bloomberg, and is facing stiff competition from the likes of Paypal, which recently acquired money transfer rival Xoom Corp.
Xoom, which was founded in 2001, generated about $61 million in revenue from online remittances in the first quarter of this year, just under half of what Western Union managed. Paypal paid $1.2 billion for Xoom in July.
The partnership with WeChat, a Chinese messaging app that boasts 650 million monthly active users, will make it the first to provide global remittances through a messenger.
WeChat, developed by Tencent, has steadily expanded beyond simple messaging, to include games, video calls and the ability to develop a “closed” social network. The Western Union tie up will allow foreign remittances to over 200 countries, for American users initially but slowly rolling out to the rest of us.
“Given the proliferation of social media around the world, we are expanding our activities in this exciting area. It only makes sense to include the WeChat platform as part of the company’s innovative digital money transfer capabilities” Hikmet Ersek, CEO, Western Union said in a statement.
OzForex has been steadily increasing revenue, and is set to pass $10 billion in the first half of the 2016 financial year. The company posted an underlying profit of $12.309 million in the last half year, and is planning to rebrand in order to become a more global player.
Whether these moves are enough to head off online competition is unknown. If the acquisition of OzForex goes through, revenue from online businesses will only lift to about 7% says Bloomberg.
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