Western Union's Q3 2025: Contradictions in Digital Transaction Growth, Immigration Policy, Revenue Expectations, Pricing Strategy, and Account-to-Account Payouts

Date of Call: None provided

Financials Results

• Revenue: $1.033B adjusted ($1,033,000,000 GAAP); adjusted revenue excluding Iraq down 1% YOY
• EPS: $0.47 adjusted, vs $0.46 a year ago (up $0.01 YOY)
• Operating Margin: 20% adjusted, up from 19% in the prior year period

Guidance:

• Adjusted revenue for 2025 expected to be $4.035B–$4.135B; company expects to be at the lower end of the range.
• Adjusted operating margin expected to be 19%–21%.
• Adjusted EPS expected $1.65–$1.75; company expects EPS at the upper end of the range.
• Consumer services expected to grow double-digits; travel money likely to approach ~$150M revenue in 2026.
• Regulatory/launch timing: anticipate change-of-control approval in Mexico before year-end; Australia digital wallet license with anticipated Q1 2026 launch.

Business Commentary:

• Revenue and Transaction Trends:
• Western Union reported adjusted revenue of $1.033 billion for Q3 2025, with a year-over-year decline of 1% excluding the impacts from Iraq.
• Consumer money transfer transactions were down 2.5% excluding Iraq, while cross-border principal growth was up mid-single digits on a constant currency basis.

• The decline in revenue and transactions was primarily due to weakened performance in key corridors such as U.S. to Mexico, impacted by geopolitical factors and policy changes affecting migrant communities.

• Consumer Services and Travel Money Growth:

• Consumer services adjusted revenue was up 49% in Q3, primarily driven by the travel money business.
• The travel money segment is expected to reach $150 million in revenue in 2026, up from nearly nothing a few years ago.

• The growth was driven by market expansion, new management, and the acquisition of Eurochange, which provided a strong foundation for further expansion.

• Digital Business Performance:

• The branded digital business increased transactions by 12% and adjusted revenue by 6% in Q3, marking the eighth consecutive quarter of mid-single-digit revenue growth.
• The significant growth in transactions was mostly from account-to-account payouts in the Middle East, while revenue growth was impacted by lower RPTs and competitive pricing pressures.

• The shift to digital reflects Western Union's strategic focus on becoming more digital-centric, leveraging partnerships and technology for growth.

• Cost Management and Efficiency:

• Western Union maintained industry-leading adjusted operating margins of 20% in Q3, up from 19% in the prior year.
• Cost management and efficiency improvements, particularly through a completed cost redeployment program two years early, contributed to margin improvements.
• These efforts are part of a broader strategy to fund necessary investments in transformation through operational discipline.

Sentiment Analysis:

Overall Tone: Positive

• Management described a "solid quarter" and said they "remain optimistic"; reported adjusted operating margin of 20% (up from 19% prior year), branded digital delivered eight consecutive quarters of mid-single-digit+ revenue growth, consumer services revenue was up 49%, and guidance was reaffirmed.

Contradiction Point 1

Digital Transaction Growth and Revenue Impact

It involves the impact of digital transaction growth on revenue, which is crucial for understanding the company's growth strategy and financial performance.

Why didn't revenue increase with improved digital transaction growth? - Bryan Keane (Citi)

2025Q3: The vast majority of the acceleration we saw from our partnerships in the Middle East, which are account-to-account payouts, come generally with a lower RPT. We do see some degradation in the revenue line, historically stable or maybe even stability when we see an acceleration in transactions. - Devin McGranahan(CEO)

Can you explain the slowdown in digital transactions this quarter? - Will Nance (Goldman Sachs Group, Inc.)

2025Q2: We did see some improvement on a sequential basis in the borders as we start to lap some of the declines from the prior year. The transactions in border were down 7% year-over-year with revenue down 8% year-over-year. - Devin McGranahan(CEO)

Contradiction Point 2

Immigration Policy Impact on Remittances

It affects the company's revenue and growth strategy, as immigration policies can directly impact remittance volumes.

Could you update on recent performance in the retail and North America segments, particularly in the Mexico corridor? - Tien-Tsin Huang (JPMorgan)

2025Q3: We've seen a rebound in May and June, and we see an acceleration in July. The lows from the midsummer have come back a bit, particularly in Mexico, but more or less across some of the important corridors. Some corridors have approached stable or flat status. - Devin McGranahan(CEO)

Has the impact of immigration policies stabilized, or is it still a moving target? - Ramsey El-Assal (Barclays Bank PLC)

2025Q2: Immigration, particularly in North America, remains volatile and has contributed to a decline in transaction volumes, particularly in the U.S. to Mexico corridor. - Devin McGranahan(CEO)

Contradiction Point 3

Digital Revenue Growth Expectations

It involves differing expectations for digital revenue growth, which is crucial for understanding the company's strategic direction and financial forecast.

Could you clarify the visibility into next year's 50% growth and the incremental margins for that business? - Devin McGranahan (CEO, Western Union)

2025Q3: We expect the revenue-transaction gap to stabilize over 18-24 months. - Devin McGranahan(CEO)

Can you discuss the digital strategy to drive double-digit revenue growth? What are the key drivers of digital transaction growth? - Darrin Peller (Wolfe Research)

2024Q4: We're excited about our digital business progress from shrinking revenue 1% to high single-digit growth. - Devin McGranahan(CEO)

Contradiction Point 4

European Pricing Strategy and Expansion

It involves the strategic approach and timeline for implementing dynamic pricing and expanding it to other markets, which are important for growth strategies.

How quickly can dynamic pricing be rolled out to other markets to realize similar benefits? - James Fossett (Morgan Stanley)

2025Q3: We have rolled out dynamic pricing in about half to two-thirds of our European market, and we are now in three metro markets in the U.S. with the anticipation of being across the U.S. by the end of 2026. - Devin McGranahan(CEO)

Can you discuss applying European learnings to North America and how to model the Eurochange transaction? - Ramsey El-Assal (Barclays)

2025Q1: We are in the early stages of this implementation. We're in about a quarter of the European market and anticipate being in nearly all of it by the end of the year. - Devin McGranahan(CEO)

Contradiction Point 5

Account-to-Account Payout Revenue per Transaction

It involves the revenue per transaction for account-to-account payouts, which affects revenue and transaction growth dynamics.

Why wasn't revenue higher with improved digital transaction growth? - Bryan Keane (Citi)

2025Q3: The vast majority of the acceleration we saw from our partnerships in the Middle East, which are account-to-account payouts, come generally with a lower RPT. - Devin McGranahan(CEO)

What factors determine your revenue outlook range, and what assumptions underlie it? - Tien-Tsin Huang (JPMorgan)

2024Q4: We've closed major partnerships in the Middle East, which are primarily account-to-account payouts, primarily with a lower revenue per transaction. - Devin McGranahan(CEO)

Q&A:

• Question from Tien-Tsin Huang (JPMorgan): Can you elaborate on the recent encouraging trends in retail and North America—was improvement driven by Mexico or broader factors?
  Response: Midsummer lows, notably in Mexico, have partially recovered; some corridors are stabilizing or flattening, but trends remain uneven—management sees early signs of stabilization for the back half.

• Question from William Nance (Goldman Sachs): LATA appeared to improve—are you benefiting from easier comps and market stabilization?
  Response: Yes—improvements reflect market stabilization and lapping of prior-year disruptions (e.g., Darien Gap closures and election-driven impacts).

• Question from Bryan Keane (Citi): Why did digital transactions (+12%) outpace revenue (+6%), and is the Q4 retail improvement macro-driven or due to company actions?
  Response: Transaction acceleration was driven by Middle East account-to-account partnerships (lower revenue per transaction) and aggressive new-customer pricing; anticipated retail improvement is a mix of easier comps, recent agent/customer wins, adoption of European go-to-market/pricing tactics, and Intermex integration.

• Question from Darrin Peller (Wolfe Research): Where do you see digital penetration long term and is the ~6% PPT increase structural?
  Response: Digital is expected to grow at double-digit rates long-term (retail stabilizing around -2% to +1%); PPT increases reflect fewer but larger transactions, partly tied to migration-related behavior.

• Question from James Fossett (Morgan Stanley): How broadly can you roll out dynamic/strategic pricing from Spain and what about further cost-efficiency opportunities?
  Response: Strategic pricing has been deployed across much of Europe and in three U.S. metros; plan is to expand across the U.S. (with Intermex) by end-2026, and additional efficiency initiatives (including tech/AI) will be detailed at Investor Day.

• Question from Timothy Chiodo (UBS): Will Intermex's faster UI/UX and agent experience be ported to Western Union or retired?
  Response: Intent is to preserve Intermex's brand, locations, and go-to-market model and selectively adopt its best practices within Western Union's agent network.

• Question from Reina Kumar (Oppenheimer): Have North America trends bottomed?
  Response: Results are lumpy—July improved, August was weak, and late-September/early-October show directional improvement; management views this as tentative stabilization, not a confirmed bottom.

• Question from Nate Svensson (Deutsche Bank): What drove the payout-to-account surge and is it sustainable?
  Response: Payout-to-account is a secular shift (multi-year 30%+ growth); Q3 saw ~40% principal growth driven by Middle East partnerships and digital funding—account payouts now exceed 50% of digital principal and management views growth as sustainable.

• Question from Cristopher Kennedy (William Blair): For the ~500k digital wallet users, what engagement/retention are you seeing?
  Response: Most engaged users are in receive markets using wallets as a cash alternative; examples include Argentina nearing 15% inflows and Brazil ~5%, with receive-side usage driving engagement.

• Question from Jamie Friedman (Susquehanna): How transferable are European best practices to the U.S.?
  Response: The European model (distribution mix, sales/support, strategic pricing) is being adapted to the U.S.; Intermex accelerates expansion of the independent-agent middle of the pyramid with full implementation targeted by H2 2026.

• Question from Kartik Mehta (North Coast): Was the August weakness driven by competitor pricing or a slow market?
  Response: Management attributes the weakness to market/consumer behavior rather than competitive pricing, consistent with Banco de Mexico data showing volatility across months.

• Question from Zachary Gunn (FT Partners): What was Eurochange's contribution to consumer services this quarter and is that growth sustainable?
  Response: Eurochange contributed roughly half of consumer services growth this quarter; consumer services has multiple scaling products and management expects a multi-year runway for continued double-digit growth.

• Question from Gus Gala (Monas Crespi Heart and Company): How do European and U.S. retail footprints differ and how will you approach U.S. retail?
  Response: Europe relies more on independent agents and postal networks; the U.S. has large strategic accounts—Western Union will import independent-agent strategies via Intermex and implement city-by-city rollouts to grow the middle channel.