Western Union at Bernstein Conference: Strategic Growth and Challenges

On Thursday, 29 May 2025, Western Union (NYSE:WU) presented its strategic vision and operational updates at the Bernstein 41st Annual Strategic Decisions Conference 2025. CEO Devin McGranahan highlighted the success of the Evolve ’25 strategy in stabilizing the retail business outside the Americas and achieving double-digit growth in the digital sector. However, the company faces challenges from political events impacting remittance flows and proposed taxes on remittances.

Key Takeaways

• Western Union’s Evolve ’25 strategy has stabilized and grown its retail business outside the Americas.
• The digital business has shown eight consecutive quarters of double-digit transaction growth.
• Political events and proposed remittance taxes pose uncertainties for future operations.
• The company is exploring the use of crypto for settlement, despite regulatory challenges.
• Strong cash flow and a 10% dividend yield make Western Union an attractive investment.

Financial Results

• Non-Americas business grew over 10% in Q1 2024.
• Digital business has seen eight quarters of double-digit transaction growth, nearing high single-digit revenue growth.
• Consumer services, including bill pay and foreign exchange, experienced strong double-digit growth.
• The Europe foreign exchange business is approaching a $100 million milestone.
• Western Union’s stock offers a 10% dividend yield.

Operational Updates

• The Evolve ’25 strategy has modernized retail operations with WUPOS 2.1, a cloud-based point-of-sale system.
• Political events in Latin America have disrupted migration patterns, affecting business results.
• The company is conducting pilots for crypto settlement in two countries, focusing on stablecoins.
• Customer acquisition and retention remain priorities, with a focus on cost-effective strategies and improved customer experiences.

Future Outlook

• Western Union is targeting high-growth corridors such as India and the US to Guatemala.
• The company anticipates similar revenue and margin profiles for consumer services as seen in remittances.
• Continued investment in digital platforms aims to reduce transaction friction and enhance lifecycle management.
• Comprehensive immigration reform is seen as crucial for sustaining GDP growth in developed nations.
• An increase in discretionary free cash flow is expected in the upcoming planning horizon.

Q&A Highlights

• The impact of a proposed remittance tax remains uncertain but could be passed on to consumers.
• Operational challenges include verifying citizenship and managing data privacy.
• The need for inbound labor in developed nations is highlighted as essential for GDP growth.
• Regulatory hurdles and cost issues are significant barriers to crypto settlement adoption.
• Capital allocation will prioritize the Evolve strategy, with potential for increased investments and stock repurchases.

In conclusion, Western Union’s strategic initiatives and focus on growth corridors position it well for future success, despite facing challenges from political and regulatory landscapes. For more detailed insights, refer to the full transcript below.

Full transcript - Bernstein 41st Annual Strategic Decisions Conference 2025:

Kent Toskey, US Payments Analyst, Autonomous Research: Not using the mic. There we go. So, yeah, Kent Toskey, US Payments Analyst at Autonomous Research. I’m filling in for Josh Levin, who couldn’t be here, today, but he covers the remittance space for us. And we’re really excited to have, Western Union here with us at our, forty first strategic decisions conference, and we’re thrilled to welcome Devin McGranahan for the fourth year in a row.

Devin joined Western Union as the company’s CEO in, late twenty twenty one after spending five years at Fiserv. And prior to that, he spent over twenty years at McKinsey, including ten years as a senior partner. Devin, welcome. Thanks for doing this. Good to see you.

Devin McGranahan, CEO, Western Union: Ken, it’s great to see you. Thanks for having us.

Kent Toskey, US Payments Analyst, Autonomous Research: Yeah. Looking forward to the conversation. And thanks for everyone, in the audience for attending. And just, I guess, a couple of housekeeping items. We’ll do a fireside chat, but if you have questions for, Devin, feel free to submit those, and we’ll we’ll weave those in.

I guess, Devin, maybe to to start off your, Evolve ’20 ’20 ’5 strategy has helped transform Western Union from, you know, a declining business to one with positive growth. Right? So as you approach the final year of the strategy, what do you see as the most critical achievement so far, and what, remains to be accomplished?

Devin McGranahan, CEO, Western Union: Thanks, Ken. We’ve done two or three things, which I think are foundational and are what we will talk about as we kind of approach the end of this planning phase and move to the next one. First, outside of The Americas, and we’ll, I’m sure, get to the political situation and the impact on remittances in The Americas, particularly in North America, we’ve largely stabilized and in much of the rest of the world turned our retail business into a growing asset. So as you saw in the first quarter, our non Americas business in general was growing 10 plus percent. And in many cases, that was on a stable to growing retail basis.

The strength of our retail basis, is now in Europe, which if you’d asked somebody five years ago that we’d have a growing retail business in Europe, no one would have believed that. But we have a high single digit transaction business with mid single digit revenue growth, in our second largest retail business in the world. So I think the foundational premise of Evolve ’20 ’20 ’5, which, you know, had some skepticism from markets who had watched our company for a long time was, could you really stabilize the retail business, which in your model and our model, if retail becomes stable, then the additive benefit of our digital business, which I’ll get to in a second, can actually propel the whole company, to positive growth. If retail continues to shrink, then the additive benefit is much less. So that stability in retail is really, really important.

The second is we’ve now had eight quarters of double digit transaction growth and approaching high single digit revenue growth, in our digital business as we’ve kind of rightsized that value proposition, got very competitive from a pricing and an experience standpoint, and focused on some very large and growing but very competitive corridors, where we’ve seen real strength in our ability to drive that business. So those two foundational elements, we think are the core of the platform going forward.

Kent Toskey, US Payments Analyst, Autonomous Research: No. It’s it’s I think we were getting to the same math. Right? Where retail is you know, it’s it’s, you know, almost two thirds, I think, on a revenue basis, maybe even higher. And so you definitely need to stabilize that, and then you get the added benefit, on on the branded side.

I mean, you you guys have spoken about wanting to be a globally diversified provider of everyday financial services, right, to the aspiring populations of the world. So when you think about beyond, beyond remittances, what specific financial services, do you believe represent the greatest opportunity for Western Union over the next, three to five years?

Devin McGranahan, CEO, Western Union: Yep. As you know, at sorry. At the end of twenty twenty three, we, recast the financial statements to include what we now call consumer services. People used to joke that we were becoming the company of other, so we had to explain that other was, in fact, the strategy, which was nonremittance based services. I don’t know how you got it.

And so we’ve been seeing strong double digit growth in those nonremittance services for the last year and a half. And that includes things like our bill pay business, our foreign exchange business, our prepaid business, and in some cases, ancillary businesses like our Send to Corrections, our VAT refund, things like that. And we have quietly now built in Europe a nearly hundred million dollar business in foreign exchange services. We call it travel money. I talked about it on the last call.

So people traveling across borders, doing currency exchange in Western Union locations. And so those are the kind of businesses that we think of as everyday financial services.

Kent Toskey, US Payments Analyst, Autonomous Research: So, I mean, that segment was was was growing quite quickly, I think, digits. I think it slowed a little bit. But how do you see the segment evolving? And I guess what’s your vision in terms of the contribution to overall revenue growth from that segment? And then I guess anything related to margins.

Right? The margins, I think, are running a little bit lower, but presumably, they’d be higher at scale. And so that incremental margin, is is is, is quite high in that business. Is that the right way to think about it?

Devin McGranahan, CEO, Western Union: Yeah. So there’s two things there. Right? We did see a little slowing in the first quarter. We one of the businesses that’s in that consumer services is our, frankly, our advertising business.

Right? And so, you know, obviously, with the run up to the election and in the fourth quarter, some of that had slowed in the first quarter. And we also saw and have seen a slowing in our Argentinian bill pay business, which in the short term, as the Argentinian economy kinda goes through the transformation that it’s going through, there has obviously been economic pressure on day to day citizens, which affects our bill pay business. But as that stabilizes, we actually think a stronger, better positioned, less inflationary business in Argentina will be good for our bill pay business. And so those two transitions you saw in the first quarter.

Margins have been getting better. But as you know, building any new business requires investment, and so we’ve been investing in in the consumer services businesses. We believe that all of the businesses that we’re building have a revenue and margin profile that looks very similar to our remittance businesses, and in some cases, have better revenue and in a few cases, even better margins to your point when you get to run rate and you get to scale. So we believe over time, the consumer services business will be additive both from a revenue growth standpoint and will not be a disincentive on margins.

Kent Toskey, US Payments Analyst, Autonomous Research: Maybe we could touch on on digital. Your your branded digital business, I think, been growing double digits on a transaction growth basis for at least, I think I think it’s seven or eight quarters now. Yep. I mean, what are some of the specific initiatives that have driven this consistent performance? And then how are you working to close the gap between transaction growth and, constant currency revenue growth?

Devin McGranahan, CEO, Western Union: So you’ll recall, I don’t know, two and a half years ago, we really became aggressive with, at the time, we called it introductory offers and, promotional pricing. And there was a lot of concern that we were going to kind of acquire price speakers and one time users. Right? And what we’ve actually seen, and this is what’s now driving the business, is we acquired a higher quality customer, when we had a market competitive new customer offer, and that group has both higher transactions per customer and higher retention. And so the ongoing efforts to continue to grow our business, acquire new customers have continued, and those customers have turned out to be a higher quality customer, in terms of the longevity and the transaction profile, which is what’s driving our double digit transaction growth.

The two underlying factors to that is that customer cohort has a higher percentage of people who pay out to account, And the payout to account business, is, a lower revenue per transaction, but a slightly higher margin per transaction. So it’s high quality business. But most importantly, it has a higher retentive value, so those customers stick around longer once they’ve entered into bank account information for their senders. And so our proportion and that business is growing 30% plus. And so our proportion of that business weighs on our average revenue per transaction, which is what drives the difference.

At some point, it will normalize as you see with some of our competitors who have very high payout to account. So as the payout to cash business slowly evolves to the payout to account business, we expect that to normalize. Although we’ve historically said, you know, we given who we are and what we’re doing, that will always have some spread between transactions and revenue, couple hundred basis points.

Kent Toskey, US Payments Analyst, Autonomous Research: I guess, in terms of timeline, I guess, to getting to that couple hundred basis points, are we you know, is it a year out, couple years out? Is, you know, some some time in that range?

Devin McGranahan, CEO, Western Union: As we’ve talked about, it is a proportion of how much we’re growing. And I have said publicly that if we can accelerate top line transaction and revenue growth, we will live with the higher band between revenue and transactions. If top line revenue growth slows due to political events or other things, you will see that begin to narrow. So we’d like to it to stay wide, and we’d like to continue to grow the top. If that doesn’t happen, you will see it start to narrow.

Kent Toskey, US Payments Analyst, Autonomous Research: That makes sense. You mentioned account to account transactions growing 30% plus, though though though they have lower yields, obviously, but, you know, the margin’s a little bit better. You mentioned stickier customer relationships. I mean, how do you balance this shift with maintaining the overall, revenue growth, of that that digital, business plus the overall company?

Devin McGranahan, CEO, Western Union: Yeah. So there are two important elements for us. Right? One is there are a lot of important corridors in the world, I’ll pick two just as an examples, where we see significant opportunity. So lots of times, you know, people, you know, look at Western Union and assume, you know, we got twenty, twenty five, 30 percent market shares every year in the world.

So we’re a GDP grower. So how do you continue to grow this thing relative to much smaller companies? And that’s just not true. Right? And so, you know, the largest single remittance market in the world is India, and we run a mid single, upper single digit market share.

So we see plenty of room to grow. That’s a very digital business. It’s a very payout to account business. So we think that corridors like that are high growth, corridors for us, which will continue to propel the business, at double digits. Same thing true in even more so in a in a market like US to Guatemala.

It is the second largest US outbound to Latin America market, and we have low single digit market share in our digital business to Guatemala. And I could go through this on multiple occasions. So the first driver of continued strength in double digit growth in our business is focusing on high growth corridors where we are underweight in terms of share. And so we’ll talk more about that at our Investor Day, but we think that is a long term rocket fuel for the business. The second is to continue to be, you know, the strong brand that we are, the trusted provider of remittance services and other products and services to, you know, what we call the aspiring populations of the world.

We enjoy a brand strength, that other people don’t have, which allows us to cost effectively acquire customers at reasonable tax, which creates a high return on our marketing investment, which fuels the engine.

Kent Toskey, US Payments Analyst, Autonomous Research: One of the things I always thought about was I mean, you have the shift to digital across the across the industry. Right? And so I guess the I guess the the key question I always had, Devin, was, you know, how does that I mean, the revenue per transaction is lower in that account to account business. I think you said the margin was a little bit higher. But I think a key question is, I mean, what is the EBIT per transaction, right, as you think about that transition to digital?

Because you’re right. You don’t have that commission cost, and distribution is getting more efficient because it’s, you know, done electronically. So how how should we think about, I guess, the EBIT, you know, per transaction between the, I guess, the physical retail business and, you know, the account to account business. Yeah.

Devin McGranahan, CEO, Western Union: So I’d actually shift conversation a little bit more. We can come back to the EBIT profile, which is very similar on a per transaction because of the mix difference changes in the costs versus the revenue. But the but the real benefit and is is the nature of the profile of the cost base. And so in our retail business, which, you know, is great for us, it’s a highly variable transaction based model where we pay commissions on the front end to the agent. We pay commissions on the back end to the agent.

And, you know, that is regardless of whether you do one transaction or you keep that customer for one year or ten years, the economic profile of that is always exactly the same. In the digital business, after you’ve invested to acquire the customer, and we believe we can do that cost effectively because of our brand at reasonable CACs, the cost profile changes. Right? So now I’m not paying commissions on the front end. And in many cases, those payout to account costs are significantly less than the cash payout commission costs.

And so now I have a recurring revenue stream that has a a cost structure that is fundamentally different and less, less variable than a a three year retail customer looks exactly like a first time retail customer. A three year digital customer is a much more valuable customer.

Kent Toskey, US Payments Analyst, Autonomous Research: And it’s stickier. Correct. Right? And it’s stickier. So presumably, the value, I guess, of that customer is also higher.

Devin McGranahan, CEO, Western Union: And that’s why I said the conversation becomes much more about lifetime value and what’s the value of that digital business as it grows over time relative to a retail business that grows over time. Right.

Kent Toskey, US Payments Analyst, Autonomous Research: Totally. The, you’re rolling out the, your your next gen, digital platform to more countries. What are some of the key features or, capabilities in this platform that are most important for driving customer acquisition and retention in these these newer markets? Yeah.

Devin McGranahan, CEO, Western Union: So the number one difference, and you can see it in the results in Australia where we’ve now been doing it for a couple years, which is the highest growth market digital market in the world for us, is friction reduction. And so simplifying the experience both from an onboarding standpoint and from a payment acceptance standpoint, makes a huge difference. The latest versions of the platform allow us to actually move one step further, which is what we consider to be progressive KYC. So your first transaction, if it’s a low dollar transaction, we require very little. As you move through your life cycle and you either increase send amounts or you want to increase receivers or corridors, we can embed that experience as you evolve as a customer versus we go through a very heavy onboarding and KYC process up front, which is a much more traditional way that we have done things versus we do that as your relationship with us develops over time.

And so that friction reduction makes a huge difference in in the experience. The second is basically life cycle management. So on the new platform, we do a much better job of staying in touch with you, recognizing your patterns, and being able to react to those, on an ongoing basis. And then the last, it allows us to be much more flexible around segment pricing, customer pricing, delivery of rewards programs, things like that.

Kent Toskey, US Payments Analyst, Autonomous Research: Great. Maybe we could pivot to the retail business, Dev. I mean, in in Europe, I think you mentioned the the strong trends in in the, in the continent. I think retail transaction growth of 10%, first double digit growth in in some time. So really impressive.

I mean, what specific elements of your European retail strategy do you think could be successfully replicated in other parts of the world? I mean, specifically in North America, which is still a big Yeah. Part of that retail business.

Devin McGranahan, CEO, Western Union: Yep. And remember, there are three key building blocks to our success in Europe. And if you remember, one of the reasons Europe is ahead, which we can then come to what it means for The Americas, in the summer of twenty two, I think it was in my second earnings call or third earnings call, we had to announce the loss of two large strategic partners in Europe, which then accelerated our need to transform that retail business. And so at the bases, we have a a distribution strategy we call the pyramid where we have high controlled Western Union branded at the top of the pyramid, own stores, exclusive independents. We then have nonexclusive independents and then our large strategic accounts.

So that pyramid allows us to maintain kind of market presence, brand presence, and, customer experience. The second element is really all the investments we’ve made in modernizing our retail point of sale. We’re now at about 80% of all locations in the world. On our most current point of sale system, we call it WUPOS 2.1, it’s cloud based. It’s very contemporary.

Everything’s on one screen, easy to get information for the agent, has reduced transaction times, down now under three minutes, from where we were six, seven minutes, before. So making that retail experience seamless, easy for both the FLA and the customer. And then the third is, you know, in Europe, we really moved to this idea of kind of real time market based tactical pricing. And so we do price adjustments in some market up to three times a day to remain competitive in the market. If we get a buy rate advantage on FX in the afternoon, we’ll put that into the market to become competitive, and to, you know, own a own a corridor or a city for an afternoon where, you know, we can drive growth.

All of those elements are replicable everywhere in the world. The US is a little different construct because we still have so much of the business in The US around our strategic partners, you know, the Krogers, the Walmarts, the Publix, the seven Elevens of the world. That’s a much bigger base, almost 50% of the base, than in Europe where that’s now a much, much smaller base.

Kent Toskey, US Payments Analyst, Autonomous Research: Okay. That’s really helpful. And and you described that retail distribution, strategy as that pyramid. Right? So you have the own locations at the top, the branded exclusive, concept agents in the middle, and then you have the independents at the bottom.

So how do you how do you see that mix sort of evolving, particularly with the the EuroChange acquisition?

Devin McGranahan, CEO, Western Union: Yeah. So the EuroChange actually is a great example of the top of the pyramid. So I don’t know if you’ve ever seen them. They’re beautiful locations. They’re well branded.

They’re clean. They’re safe. They’ve got great high quality staff, but they have a very small even though they were a Western Union agent, they have a very small remittance business because their clear focus has been on currency exchange. So we think the combination of their high quality retail operations and our ability to emphasize Western Union products and services really, again, puts us at the top of that pyramid with a very high quality experience for our customers in a controlled environment with the Western Union brand. And so it’s the perfect example of the strategy in Europe where we’re now, I don’t know, 500 ish owned locations across Europe, Italy, The UK, Switzerland, Spain, Belgium.

We’ve kind of built this out, and The UK is a great example of that strategy at the top of the pyramid and how we get there quickly.

Kent Toskey, US Payments Analyst, Autonomous Research: You’ve, you’ve invested significantly in in the point of sale system, upgrading that, rolling that out, moving to a cloud based solution. I mean, beyond efficiency, so you mentioned the I mean, there’s some efficiency there. I think you mentioned three minutes, in terms of the the, to process a transaction versus seven before. You know, how do

Devin McGranahan, CEO, Western Union: you see this technology investment changing the agent, I guess, and customer experience going forward? Yeah. There’s two or three things in there that just really make life a lot easier. So I’ve talked about kind of this notion of, remember me and quick resend. So any customer comes up, gives us their phone number, immediately pulls up their most frequent sends, their most frequent receivers, two clicks, they can do a repeat send.

Right? And so using customer level intelligence, customer level data to make it easy for the agent. Second thing is enabling the agent to solve problems. Our historic model was to either have the agent or the customer call, and we would help solve the problem. Putting more of that problem solving, being able to do refunds, being able to do name changes, being able to clear compliance holds, allowing that to happen at the point of sale through the technology at the interaction that the customer and the agent are having versus interrupting that interaction and putting a call center in the middle of it.

And then the third is it’s a lot more flexible to allow us to price at the corridor at, you know, FX levels, directed source rates, being able to have different prices for different payout partners, particularly as you move to more payout to account. All of that is way, way easier in the new system than in the old.

Kent Toskey, US Payments Analyst, Autonomous Research: So agents are happy. I guess that does that help the blitz that you’re giving back to the agents? I mean, presumably, if they’re doing more transactions Would

Devin McGranahan, CEO, Western Union: you like would you like a job as a sales guy? Because I like to tell the sales guys that. They tell me no. But yes. Ultimately, what it does is help us win at least our fair share, if hopefully not more, within a competitive agent environment.

I don’t think it changes the economics, but it does help us change potentially what part of the agent share of business we win.

Kent Toskey, US Payments Analyst, Autonomous Research: Great. Maybe just last one on retail. I mean, I I think in terms of the evolve 2025 strategy, the goal is really to improve the retail business, I think, to sort of flat, you know, stable to maybe slightly growing over time. So where are we, Devin, I guess, on that journey,

Devin McGranahan, CEO, Western Union: you know, as you think about 2025 relative to those expectations? So we’ve achieved that in the Non Americas. The change in the political situation in The Americas, and we started talking about this in the third quarter of last year where the elections that started happening south of the border, in places like Panama and Nicaragua and Colombia, Haiti, those began disrupting the migratory patterns, across, Latin America. The election in November had a significant impact on, the border, and so our, South American and Latin American business saw a lot less interregion transactions as fewer and fewer people were migrating north up into, Mexico and eventually into The United States. So when people talk about what’s the effect of basically closing the border, it’s not actually on The US.

The effect of closing the border and you can see this in different players. You know, we probably have the biggest exposure south of the border. The less exposure you have south of the border, the less you’ve seen that effect. It’s actually on the region where people were migrating towards The US, not the actual into The US. So the border closure is really an issue for our business in Latin America.

Post November, the election here has caused, and we talked about this on the earnings call, a reasonable decline in transactions as customers become more reticent of being in public, of being in our retail locations, but has seen a reasonably measurable increase in principle per transaction. So people are sending less frequently, larger amounts of money, pretty much consistently across corridors in most major markets in The US. And that those two effects have slowed, our progress in being able to move the Americas, to a positive revenue and transaction trajectory.

Kent Toskey, US Payments Analyst, Autonomous Research: You’ve you’ve mentioned that new customers represent a relatively small percentage of your US business. Correct. I think around 5% or so. How how does that inform your strategy, Devin, for for navigating, I guess, potential immigration policy changes?

Devin McGranahan, CEO, Western Union: Right. Look. Our our long term hope is comprehensive immigration reform. Every developed country in the world is dependent on inbound labor given current birth rates in order to sustain positive GDP growth. It’s a it’s a fact for all g seven countries.

You even see it in places like Japan, which has probably been the most insular country in the world. They actually are welcoming people from Indonesia, Malaysia, The Philippines in order to get the labor productivity and labor growth rates going. I mean, they actually teach people Japanese so that they can come and work in Japan now. And so this is the long term trend is undeniable if the g seven nations of the world all wanna maintain GDP growth. Now in order to get there, you gotta have political will.

You gotta have comprehensive immigration reform, and so we hope for all of those things. In the short term, most of our customers are already here, to your point. The impact of less immigrant flow is really on the Latin American business. It’s not so much on the North American business. The behavior modification in North America, the less transactions, the higher principal, that’s the real impact here in North America is people are just more reticent, to be out in out in public sending money.

And so we’ll I don’t know how long that’ll last, but that’s what we’re seeing. I’m sure in a in a question or two, you’ll ask me about the current big beautiful bill and what’s in there that could have a material impact on my business. And so, again, we don’t know what that impact will be, but it will be, again, a chilling effect on people wanting to send money home.

Kent Toskey, US Payments Analyst, Autonomous Research: I’m looking at my script. That is the next question. So yeah. So I think that, I think Republicans I mean, initially, I think they proposed a 5% tax on remittances. I think there’s some talk of that coming down slightly.

Devin McGranahan, CEO, Western Union: I think what it passed the house was three and a

Kent Toskey, US Payments Analyst, Autonomous Research: half percent. Three and half percent. Exactly. So so a little bit lower than the initial five unless the sender can prove he or she is a US citizen or or national. So I guess to that point, like, if the tax is enacted, how will it impact demand for remittances?

You know, to what extent will remittance providers absorb that tax through lower prices? So how are you guys thinking about the impact and how you’re gonna react to it if it goes through?

Devin McGranahan, CEO, Western Union: Yeah. Well, let’s be pretty clear. There is no strategy of being able to absorb it. You know? It, in essence, is a it is a doubling of the cost of sending remittances.

Right? I mean, our average take rate is somewhere between 34%. It’s a three and a half percent tax. So unless we were to take our average take rate to zero, it’s just it it will get passed on to the consumers. We don’t know.

It is a high degree of uncertainty. We’ve never seen a large scale tax at that level, which would, in effect, double the costs in a major developed market. And so, coincidentally, in Brazil last week, the Brazilian government passed an exactly same tax. And in classic Brazil Brazilian fashion, turned it on the next day. So we actually started collecting the tax at the end of last week in in Brazil, but it’s too early to tell whether what effect it’s having.

But at least it’s gonna give us a small market example of what happens when you put a tax of that scale into the remittance business. But this is one where, you know, we just we’re we just don’t know the answer.

Kent Toskey, US Payments Analyst, Autonomous Research: Presumably, I mean, the the the the, the money when it’s sent home, I mean, it’s being used for things like food and shelter and and, you know, necessities. So, presumably, you can’t just turn that off. You know, there would be some demand inelasticity there. Would I would I that’s right, and

Devin McGranahan, CEO, Western Union: I think it’s the same effect, which is people will send less money less frequently, and the tax will take a chunk out of what they can send home. And so, you know, we’re paying attention to it. In there, and you highlighted, there’s another complexity, which is about who the tax applies to. And so, you know, how that gets managed and implemented is a very complex and open question. Most of us don’t walk around with our citizenship documents.

And so having a retail agent in a independent shop trying to verify the validity of immigration status and citizenship is an exceptionally difficult thing to think about doing at large scale in any reasonable proximity of quality. And then the secondary corollary to that is now if you are collecting all of that information, Where does it go? Whose privacy rights are you maintaining? How are you maintaining them? Who has access to that information?

So you get into a sticky wicket pretty quickly on how you would do the second part of this law, which is only administer it to people who are non US citizens or not here documented legally. So it’s a very difficult thing to think about how it will get implemented. Brazil just said we’re gonna charge everybody. We don’t care. So they just said three and a half percent remittance tax across the board.

No exceptions. Just pay the tax. That’s actually easier to deal with than the way this has been written. So so so, potentially, I guess, there’s an

Kent Toskey, US Payments Analyst, Autonomous Research: impact on demand, but also on the operational side is what you’re saying in terms of I I guess, you would have to give the agents, you know, some some ability to to check that, to track that, to store that, you know, maybe pass that information along. So any any way to think about, I guess, the the operational aspect or the investment behind them?

Devin McGranahan, CEO, Western Union: I would say it is complex. And if we are required to figure it out, we will. As you know, there was a Southwest border targeting order that was put in place for 30 ZIP codes along the border. It has been held in a band at least in California, but it is live in in Texas, which required us to take the FinCEN regulations that normally begin at $10,000 down to $200, in terms of source of funds, address, a bunch of other requirements that if you walked into your Bank of America branch with $10,000, they would have to follow. They moved it down to $200 in these 30 ZIP codes.

We successfully implemented that across almost all of our distribution, and we’re abiding by the law on that consideration in those ZIP codes where it’s still in effect. We believe we operationally could do the same thing here, but it’s super complicated and, again, has secondary effects about, you know, document protection, consumer privacy, things like that.

Kent Toskey, US Payments Analyst, Autonomous Research: Maybe just last one on on on migration patterns. I mean, you mentioned the the migration patterns across LatAm, you know, have been slowing affecting the, the the business results. I mean, what longer term trends do you see in in global migration patterns? We talked about, you know, people learning Japanese. I think populations in certain developed countries are actually in decline if you exclude migrants.

So, you know, how do how do you think about that long term and how Western Union is positioning itself? Look. The there are

Devin McGranahan, CEO, Western Union: two effects that we think are very important. One is, which we’ve already talked about and you highlight, every developed nation in the world has seen a slowing of their birth rates. And in order to maintain strong GDP growth, you know, GDP is basically quantity of labor times productivity. Productivity has been declining. You have to increase the quantity of labor if you want GDP growth.

And so that can only happen through inbound migration in most big countries around the world. The other benefit is people who move from lower productivity countries to higher productivity countries, it’s not because the labor is less productive. It’s generally the construct and the economic model in the countries that they’re moving from to the countries they’re moving to. So the global net benefit of that migration on global GDP is actually you take people who are in a relatively low context and productivity environment, and you put those same people in a higher context productivity environment. It is it is beneficial globally for everybody involved.

And so we think it is a it is a force for a business like ours that is long term and, you know, unstoppable. Right? Now it has lots of other issues, ebbs and flows, and political considerations, but it’s a strong underlying force. The second, which is to our evolve 2025 strategy, one of the most important demographic consumer cohorts in The United States today is the Latino community. Right?

There’s 30,000,000 Mexicans living in The United States. Right? And so many of those have had experiences with Western Union. We’re a trusted financial services provider, and this is true everywhere in the world. The embedded base of our past, current, and future customers is an asset that we have that we continue to use to build out our business, grow across a range of products and services because we are recognized by these communities.

We have been part of their journey in establishing themselves in a new country, and we have credibility. And so we believe that is a long term, positive trend for us as well.

Kent Toskey, US Payments Analyst, Autonomous Research: We have about, ten minutes left here. I wanted to pivot maybe to, you know, technology innovation. You know, you’ve expressed interest in leveraging crypto, for settlement to, potentially reduce the float. I think Matt has talked about, you know, billion dollars of of sort of, you know Yep. Working capital in the business to to manage the business.

And and and so, I guess, what are the specific regulatory or tech, hurdles that need to be overcome before this becomes a significant part of the operations?

Devin McGranahan, CEO, Western Union: Hey. Look. A a some clarity on a regulatory framework, particularly for a company like ours is always helpful. But we’d like more clarity around, you know, how the regulators will treat it. Is it an asset class?

Is it a transaction? Is it regulated security? Right? So we’d like that. That would be good for us.

In the absence of that, we continue to experiment and look for ways. So right now, we have pilots going on in two countries in the world where, you know, we are, settling and, moving money through stablecoins. And what I would say is in countries that have, high either operational logistics or regulatory barriers to the free movement of currency, it’s helpful, but it’s cumbersome and expensive. For places that have less of that, it’s not yet clear what the value proposition is because it’s complex and expensive to take from fiat currency, move into a stablecoin, move the stablecoin across geographies, translate the stablecoin back into local currency, the transaction costs and the logistics of getting high quality exchanges on both end to do that, enough volume to be able to do it in and out of the local currency, is, again, operationally challenging and expensive.

Kent Toskey, US Payments Analyst, Autonomous Research: And what I guess, what brings that cost down? Right? I guess, is it just Scale. You need more liquidity, I guess, in that market? So if you get the volume up, then the, I guess, the spread and the ability to convert into local comes down.

Devin McGranahan, CEO, Western Union: And it’s not so much the volume

Kent Toskey, US Payments Analyst, Autonomous Research: for us.

Devin McGranahan, CEO, Western Union: It’s the volume in that market for that coin. Right? So the more nonremittance use cases that people are you know? So in order for you to offload a stablecoin, someone in the local market has wanted to invest in that stablecoin so that then frees up the ability to get local currency. Right?

So if there’s high market demand for that stablecoin, that creates more liquidity, which makes the on ramp and off ramp easier. So the more nonremittance examples of why people are investing in that stablecoin in that country increases liquidity and makes it easier for us to unload and offload. And so with the I mean, because I think there’s talk of stablecoins potentially disrupting cross border providers. I mean,

Kent Toskey, US Payments Analyst, Autonomous Research: I I guess, are you guys thinking about this as, hey. We’re actually gonna use stable coins to lower our cost. We still like, this end customer still needs to be acquired. We’re gonna own that relationship. We’re just gonna use this as another rail to operate more efficiently.

Now that might affect market pricing across the industry because presumably other providers might pass along that lower cost to consumers. But is that sort of the right way to think about it where you would still own the end customer in terms of that relationship?

Devin McGranahan, CEO, Western Union: Look. I’ve I’ve said this many, many times. We’re not actually in the business of moving money. Today, we use a highly inefficient legacy system called Swift. Anything that could make that easier, faster, or cheaper is better for my business.

If somebody figured out how to move money with Turbo Pigeons, I’m happy with Turbo Pigeons. Right? Like, like, my alternative is the SWIFT banking system. My business is acquiring customers, which we talked about, cost effectively at reasonable tax in both the retail, ensuring regulatory compliance that we know who those people are, we know who they’re sending to, We know why they’re sending, and we know what the source of their funds are. That’s my business.

And how it then moves from that person to the person who’s receiving it on the other end, I’m moderately indifferent, and I’m continuing to seek the most efficient, as Matt has said, least capital intensive way to do that. And if stablecoins can do it, awesome. Right now, we haven’t found that. It’s more complex and more expensive, but it does fall some market inefficiencies for us in a few places of the world where there is no good alternative. But wherever there’s a good alternative, it’s not yet met the threshold for efficiency and cost effectiveness.

But when it does, we’re happy to, every day long, do it that way.

Kent Toskey, US Payments Analyst, Autonomous Research: Kinda reminds me of, I guess, account to account, right, where the distribution is getting more efficient, the cost comes down. Presumably, you have a slightly lower rep per transaction, but it’s very good margin Right. Business for

Devin McGranahan, CEO, Western Union: you guys. But but, again, this, so long ago, long, long time ago, societies around the world decided and then not being able to move money anonymously from one country to another results in really bad shit. Right? And so human trafficking, terrorism, weapon trafficking, child exploitation. I can go down the list of really bad shit that happens.

And so there’s a framework everywhere in the world that, regardless, again, this idea that somehow, you know, digital currency is gonna absolve you from all of that, and therefore, it’s gonna be the super low cost easy way in which to move money from one country to another, it’s not gonna happen. Right? Because the world has decided they don’t like all those really bad things, and the way you prevent all those really bad things is you actually know who’s sending money to who and why, and you have some controls around it. And that’s the business I’m in.

Kent Toskey, US Payments Analyst, Autonomous Research: No. It makes a lot of sense. I wanted to weave in one question, I guess, that’s kinda related to this, from the audience. And it says, you’ve been paying out your strong, cash flow in the form of dividends and buy buying back stock, but the stock has been down, why not take that cash flow and replicate the micro strategy playbook and buy Bitcoin?

Devin McGranahan, CEO, Western Union: Have you ever met my CFO?

Kent Toskey, US Payments Analyst, Autonomous Research: Matt. I know Matt. Yeah.

Devin McGranahan, CEO, Western Union: Yeah. Exactly. I think Matt would, probably not really support that idea. It would add a certain amount of volatility to our balance sheet that our regulators probably wouldn’t like. I mean, MicroStrategy is not a regulated financial institution in over a hundred countries around the world who maintains an investment grade credit rating, and our core business is dependent on those things in order to do exactly what we would talk about, which is move money seamlessly around the world, probably a large quantity of Bitcoin in the balance sheet is not gonna sit well with my regulators.

Kent Toskey, US Payments Analyst, Autonomous Research: I guess maybe a broader question though, I guess, you know, have you thought about maybe taking down margins or, like, reinvesting and maybe changing up the playbook a little bit more? I mean, I know you’re you have the evolved strategy. It’s it’s it’s been working. You’re moving in the right direction. But, you know, have you thought about maybe being more aggressive, I guess, in trying to mix it up?

Well, the good news is for

Devin McGranahan, CEO, Western Union: the last three years, a lot of our incremental free cash flow has been to support the evolve strategy. So, you know, becoming market competitive, you know, has required us to, you know, significantly reduce prices. We’ve had to relever the balance sheet having exited Russia and sold our business solutions business. And then as you know, we’ve had this deferred tax liability that’s been hundreds and hundreds of millions of dollars that we cleared on April. And so we expect to have a reasonably, increased level of discretionary free cash flow in this next planning horizon than we’ve had in the last three years.

And I think that opens up opportunities either for accelerated investment, accelerated stock repurchase, accelerated m and a. Many of the constraints over the last couple of years, we’ve now worked our way through.

Kent Toskey, US Payments Analyst, Autonomous Research: Great. We have about a minute left, Devin. So, we have generalist specialists in the room. We have people listening in. Hey.

What’s the pitch on Western Union, and, why should people buy into the stock today?

Devin McGranahan, CEO, Western Union: Hey. We got a 10% dividend yield. Right? So can’t replicate that. Strong free cash flows, an investment grade balance sheet, a change in the underlying health and trajectory of the business.

The first time I sat on this stage, we were shrinking 6%. You know, as you noted, we are, in the fourth quarter of last year, we actually grew. In the first quarter, we were only down, 2% ex Iraq. And so this business is largely stabilized, and so we think an ideal opportunity to think about Western Union as an investment.

Kent Toskey, US Payments Analyst, Autonomous Research: No. Absolutely. Well, we’ll have to leave it there. Devin, thanks so much for doing this, and, look forward to following your progress. Thank you so much.

Thanks, everyone, for listening.

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