What a Western Union, MoneyGram Merger Would Mean to Africa
Friday, May 8, 2015
Shares in MoneyGram International, one of the largest money transfer firm s in the world, rallied as much as 41 percent after Bloomberg, citing sources close to the deal, reported that the industry leader Western Union was in “early stage” talks to acquire MoneyGram.
Western Union later denied that such talks were taking place and said the Bloomberg report was “not accurate”, but by then MoneyGram shares had closed 21 percent higher.
The two firm are the largest money transfer companies in the world and account for two-thirds of remittance transfers globally. A merger between them would have created the world’s largest money transfer company with a total global market share of over 20 percent.
According to the Wall Street Journal, MoneyGram has a 5 percent market share while Western Union holds a 15 percent market share.
Marrying the two companies would have meant almost all transfers across the world would be going through one company and would have had profound consequences for competition in the remittance market especially in Africa, where remittances are a very important part of most family incomes and a big source of governments foreign exchange.
In a 2014 report by Overseas Development Institute (ODI), a UK-based think tank, said Sub-Saharan Africa receives nearly $15 billion in remittances from Africans living abroad and pays about 12 percent, or $1.8 billion, of this in transfer fees.
A big chunk of these transfer is channeled through large established firms like Western Union and MoneyGram, while other smaller rivals including WorldRemit, TransferWise and Wal-Mart Stores also get some share of this cash.