How Trump's policies sharpened MoneyGram's digital focus

Register now

In the months since President Trump’s America First policies forced China's Ant Financial to abandon a proposed deal to buy Dallas-based MoneyGram, the U.S. company has forged other key partnerships to build a global digital remittance network.

These partnerships won't give MoneyGram the instant scale it would have had by merging with Ant, which operates China's massively popular Alipay wallet. It may be a slow process, because of the complexity of lining up banking relationships and getting regulatory approval in each market.

But if this strategy is successful, MoneyGram — founded in 1940 — will become a more nimble, digital player able to compete with the swarm of cross-border payment upstarts and longtime competitors like Western Union.

“Since we got the news the Ant Financial deal wouldn’t move forward, we’ve been working on refocusing on where we want to take things, and overhauling our business model for a new market strategy,” said CEO Alex Holmes, who joined MoneyGram in 2012 from First Data Corp. and became CEO in 2016.


MoneyGram's most significant move so far in advancing its global digital payments agenda after the failed Ant Financial deal is a debit-push partnership with Visa announced in late July, marking the first time U.S.-originated mobile cross-border payments will be available immediately in a debit or prepaid card through Visa Direct.

It's hard to know whether a Visa-MoneyGram pact would have been possible under Ant's ownership, especially given the Trump administration's concerns about the potential threat of Chinese payment and technology companies in the U.S. market. Ant's Alipay does have operations and partnerships in the U.S., but these have largely avoided a head-on conflict with the major card networks to instead focus on serving Chinese tourists.

The Visa Direct deal will serve just two corridors—U.S. to Mexico and U.S. to the Philippines—when the service is goes live in October as anticipated. But if it’s successful, Holmes hopes to expand the option for Visa debit push payments to other markets MoneyGram serves.

“MoneyGram has a large network for sending and receiving funds through bank accounts, but with many more users connecting through mobile wallets, Visa Direct can get funds there faster,” Holmes said.

The deal isn’t exclusive. Visa is looking for other partners interested in using its debit push payments for cross-border remittances, said Cecilia Frew, Visa’s senior vice president and head of Visa’s North America Push Payments.

MoneyGram sees this connection as the first of many that will augment its extensive brick-and-mortar remittance network with alternatives for sending funds to an increasingly mobile user base.

“Working with Visa Direct gives MoneyGram users the option of a fast, streamlined approach to sending money without having to enter account information and bank routing numbers and it’s something we want to offer everywhere we can,” Holmes said.

Ant's scuttled plan for MoneyGram
Much discussion about the proposed MoneyGram-Ant Financial merger tended to focus on the deal’s advantages for Ant, which would gain access to MoneyGram’s network of 350,000 agent-staffed locations around the world, enhancing the opportunities for mobile wallet users loading cash in and out in many new markets.

MoneyGram and Ant Financial terminated their proposed deal after nearly a year when the companies were unable to meet the demands of the Committee on Foreign Investment in the United States.

For MoneyGram, the deal would have connected its brick-and-mortar locations to millions of mobile wallets Ant Financial supports directly or as a technology provider or investor, Holmes said. Those include Paytm in India, KakaoPay in South Korea and Mynt in the Philippines, among others, he noted.

“Ant has access to many of the key digital wallet properties in Asia, and MoneyGram could have become their de facto money-transfer service, for money flowing in or out of the MoneyGram network,” Holmes said.

Instead of merging, the two companies agreed to collaborate on strategic initiatives, and one of those has gone live. Earlier this year MoneyGram established a channel for Mynt's GCash mobile wallet users in the Philippines, combining remittance and online payments capabilities, Holmes said.

“There are other wallet integrations we’d like to do with more partners in other markets—we’re working on a connection to Paytm in India—but each requires separate regulatory approval, so we’re waiting and hopeful,” he said.

Slow and steady
Without Ant's scale, MoneyGram must grow its digital network gradually. A few years ago, MoneyGram’s ability to support online remittance was limited to just a few countries, but now it offers a digital option in 10 countries, and the company hopes to expand to more than two dozen by the end of the year, Holmes said.

“We’re adding the ability to send remittances to bank accounts, to mobile wallets and mobile browser access, and in the next six months we’ll have a much broader digital offering,” he said.

MoneyGram also is retooling its operations to bring an omnichannel approach to existing brick-and-mortar facilities, to accommodate walk-in customers as easily as the growing mobile audience, Holmes said.

“A lot of people may have dismissed MoneyGram as a legacy company because the user experience was store-facing, but that overlooks two key factors. We’re building the digital side of our business for mobile customers and we’ll still have an on-the-ground competitive advantage over mobile wallets that don’t offer users a convenient way to get cash in and out,” he said.

Where MoneyGram customers are using mobile options for remittances is mostly net new traffic.

“We’re not seeing cannibalization of our core business as mobile expands, because these are mostly new, younger customers,” Holmes said.

In the wake of the failed merger with MoneyGram, Ant Financial has continued investing in mobile wallets in different countries, building merchant acceptance for its mobile wallet globally, including deepening its presence in key tourist zones in North American cities.

For reprint and licensing requests for this article, click here.