Magazine article American Banker

MoneyGram Eyes Bank Niche

Magazine article American Banker

MoneyGram Eyes Bank Niche

Article excerpt

The newly independent MoneyGram International Inc., a distant second in money transfer, says it is cautiously optimistic about its plan to use banks as a distribution network.

Over the past year MoneyGram, which Viad Corp spun off last week, has been trying to stake a strong position by signing reseller agreements with large U.S. banks, a niche that First Data Corp.'s Western Union, the money transfer market leader, has not claimed.

Foreign banks have long operated as agents for money transfer companies, but few major U.S. banks -- which only recently began offering their own remittance products -- have done so.

MoneyGram, of Minneapolis, says it hopes to change that. It has signed agent agreements this year with U.S. Bancorp and Union Bank of California, which is majority owned by Mitsubishi Tokyo Financial Group Inc.

Western Union, of Denver, has struck deals with a handful of small banks but has yet to announce a large deal. A spokeswoman said such plans are in the works.

James Leroux, a principal at First Annapolis Consulting Inc. of Linthicum, Md., said it is difficult to measure global remittances because of the widespread use of informal networks. But in electronic transfers, Western Union has a 70% share to MoneyGram's 15%, he said.

Western Union has more than 170,000 global agent locations, and MoneyGram has 68,000, according to the companies. (First Data spun off MoneyGram off in 1996. Viad bought it two years later.)

David Parrin, MoneyGram's chief financial officer, said in an interview Thursday that using U.S. banks as distributors is still an experimental strategy that "needs to be proved." He is hopeful, but "people have to come into the banks" to buy the products, and money transfer customers "have typically not gone into banks."

MoneyGram's international agents tend to be banks or "quasigovernment agencies," such as post offices. …

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