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Stock Strategist Industry Reports

Dissecting the Sources of Western Union's Moat

Scale is the star, with brand and the network playing supporting roles.

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 Western Union (WU) clearly dominates the money transfer industry, but we believe the source of its strong competitive position can be easily misunderstood. We have dissected and analyzed the drivers of the wide differential in profitability between Western Union and its competitors; our conclusion is that scale is the predominant source of advantage, with brand and the network playing supporting roles.

The Money Transfer Business Model Can Be Attractive
The money transfer industry is characterized by a few large global players, such as Western Union, MoneyGram (MGI), and Euronet Worldwide (EEFT), and smaller operators that focus on serving specific ethnic communities and intercountry corridors. Money transfer companies generate revenue by collecting fees, as well as realizing a spread between the retail rate of exchange they offer their customers and the rate they can achieve with bulk currency trades.

Brett Horn does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.