Wal-Mart Robs MoneyGram, Western Union’s Money Transfer Service

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Ouch. MoneyGram International (NASDAQ:MGI) and Western Union (NYSE:WU) just got hip-checked by Wal-Mart (NYSE:WMT). The retail giant announced this week that it will begin offering lower-cost money transfers in the U.S. under its own brand, and after that disclosure, shares of MoneyGram and Western Union took a tumble. According to The Wall Street Journal, MoneyGram currently provides the money transferring service for Wal-Mart — that’s why its shares dropped 11 percent, to $16.04, in early trading on Thursday.

Shares of Western Union took a hit, too, its stock falling 5 percent, to $15.21. While MoneyGram counts on U.S.-to-U.S. transfers for 30 percent of its total transfer transactions, the Journal reports that 85 percent of Western Union’s consumer transactions involve at least one location outside the U.S., but with both cases, the parties counted on Wal-Mart’s business to sustain their services. 

Wal-Mart’s new service will be called Walmart-2-Walmart. The Wall Street Journal said Thursday that the retailer will offer transfers up to $50 for $4.50 and up to $900 for $9.50. Those price points make Wal-Mart the new cheapest option in the game, as most competitors charge up to $76 for an $800-$900 transfer. The biggest market for money transfers is made up of lower-income shoppers who are typically bankless, and luckily for Wal-Mart, that’s its main consumer base.

Thus, Wal-Mart already understands the marketing strategies that are effective with these customers, and it is expected to take advantage of its knowledge about the consumer base. As highlighted by the Journal, people in the military and oil field workers are also big money transfer customers, so Wal-Mart will hope to win over these transactions, as well.

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