The Western Union Company (WU) Earnings Call Transcript & Summary

Good afternoon, and welcome. This is Ken Suchoski. I work on the Payments and Fintech team at Autonomous Research, and I cover the remittance space. We're excited to have Western Union here at our 36th Annual Strategic Decisions Conference. This is Western Union's first time here. We're excited to have Hikmet Ersek, joining us today. Hikmet is the President and CEO of Western Union. Hikmet, great to see you again. Welcome, and thanks for joining us.

Thank you for having me here. Thank you.

And I'd like to thank the investors for joining us today as well. Just a few logistical items before we get started. First, for the format of today's conversation. We're going to do a fireside chat. I'll start it off with some questions, and we'll also be taking questions from the audience as we go. So we want to make this as interactive as possible. So as a friendly reminder, you could submit questions using the pigeonhole link available on the left side of your viewing screen. When you click on that link, it will open a new window in your browser. And you could submit your own questions at the top, there's a box at the top of the screen. You could also vote on questions already submitted by pressing the up triangle next to any question. So we'll be checking those questions throughout the presentation, and we'll pass those along to Hikmet as they come in. And second, we are working with our partner Procensus to do live polling of investor reviews for each company at our conference. There's a link to access the Procensus poll on the left side of your screen. At the conclusion of today's fireside chat, I'll ask you to take 60 seconds to complete the poll to get your views on Western Union, and you'll have access to the investment community sentiment as soon as you complete the poll. Lastly, if you have any questions or if you experience technical difficulties, please reach out to your sales contact or corporate marketing at Bernstein.

So with that, let's get started, Hikmet, you provided an update this morning, trends are looking better in May. The digital money transfer business had some nice growth in April. So maybe you can update us on the recent trends that you're seeing?

Sure. I think the -- we believe the transactions about in March after the second part of March, which were impacted our -- COVID-19 impacted, our business were significantly down, and we updated The Street and investors, but they have been improving very well in April and even better in May, in general, digital and retail money transfer business. Digital had an acceleration of growth and these are new customers coming to our network. It's important to know that. We know that they are new, they didn't use Western Union in the last 2 years. We see that also in Google searches that Western Union is an absolute #1 search in the search engine when the people look for international money transfer. And that puts us in a good position because if you look at that, the 77% growth on April, on the digital was impressive, and in May, we do see an acceleration. We will give more update on that in -- 2, 3 more days left in May, beginning of -- how May numbers are coming, but I feel comfortable with the digital acceleration. Additional to that, Ken, the good news is also that the retail money transfer business on the C2C is also coming pretty good, recovering especially in the countries where the lockdowns are ending, where the countries are reopening. Few to name, Germany, Switzerland, Austria, Netherlands and Denmark, we could see strong growth there. The people are really coming back to the locations and sending to their loved ones money. And these are also coming strong. So the May numbers also on the retail numbers are improving. And our Business Solutions also have a good -- as you know, had a good Q1. So overall, I would say that the business are improving, and we -- puts us in a good position that we will definitely have better quarters coming up or months than it was in the past.

Great. Yes, it seems like the improvement was fairly broad-based. I guess just on that acceleration into May. I mean is it -- are we talking a few percentage points of acceleration? Or is it more of a meaningful pickup?

I think it's a nice pickup because the lockdowns are coming to more countries. Even as we speak, actually, Spain and Italy are reopening again, right? And these countries are outbound countries. They have their people. They want to go on to location and make their transactions. Despite the lockdowns, as I mentioned earlier, the acceleration of digital is amazing, actually, it's really growing stronger. And that is going to continue. So in digital, 2 things, one is westernunion.com, one is our digital partners. And both are really showing very strong growth rates. Even in Saudi Arabia, where there has been some lockdowns, also the oil prices has been down. There's some volatility on oil prices. We see very strong growth on our digital business in Saudi Arabia with our partner there. And in Russia, as we reported in Q1, in Russia, the European Union and CIS numbers were growing by 1% and mainly driven by Russia and there -- so -- and then I could say also, even traditional corridors like U.S. to Mexico, which has been there for longer time, and we are gaining market share. And we did not -- basically didn't see any U.S. -- Mexico didn't see any COVID-19 impact, has been growing and during the COVID-19 pandemic even they're growing. And Banco de Mexico just released the numbers, April numbers, and we saw that we are gaining market share there also.

Right. And then I guess, on the Middle East is -- you're getting some help there from the partnerships, but have you seen any impact from the lower oil prices? And is that kind of filtered through into your business yet?

Not yet. As you know, Ken, the volatility has been high there, one day up, one day down. I think it's probably -- it's a long-term impact. You have to see it in the long term. We did not see any impact. We did also not see any migration pattern changes in the Middle East or job impacts yet to have an impact to our business. We did see it, though, being transparent here, we did see though closed locations, right? Countries were closed, like UAE was closed or Qatar was closed, right? And the people couldn't do -- make transactions. We did see an impact. But now these are opening also, and people are coming and sending money.

Right. And so those economies that are opening back up, have you seen those -- are the transactions approaching levels that you experienced pre-COVID? Or are we still below the pre-COVID levels?

Well, just on the Middle East question, maybe one thing I forgot to mention that is also -- and overall, the oil-producing countries have about -- it's about 10% to 15% of our revenue. So that diverse is our business. So the impact there, the volatility there doesn't impact our total business. But to your second part of the question, your second question, if the countries, when they reopen again, pre-COVID-19? Absolutely, yes. Obviously, there are different factors. Every country is different, but these countries were reopened, like in these 5 countries I mentioned earlier, Switzerland, Austria, Germany, Netherlands and Denmark, where there is also social safety net. So people are continuing to get their cash, their money, so they will support their loved ones home. But at the same time, the opening, the country being freer, going on the -- to their work, doing their normal day-to-day duties, one of them is sending obviously money back home. And these are the existing customers, right? They're the retail customers. Once again, I can't emphasize enough that new customers are the digital customers, which is a great news, it's additional and the economics there are also very beneficial for us. So we are pleased with the digital also.

Yes. How about the agent locations, a few other remittance providers have said that the government restrictions and the lockdowns have impacted their agent locations. So have you seen that across your portfolio?

Yes. During COVID-19, of course, some of the locations get locked down, right? In the beginning in March 15, obviously, many locations get locked down. And country by country, they get released. But good news is also many of our locations are bank locations and post office locations, right? Globally. And they're seen as essential services. So continue to serve the countries. And in some countries, we were talking with the regulators and the regulators seen Western Union as an essential service, especially in the receiving countries, bringing remittances because it's a big income for the countries getting money, especially in the crisis situations. But we did see some lockdowns like in India, there were some location closures and it impacted our business. People couldn't send money to India because locations were not open. I mean you can be sending the money, but you couldn't pick up the money, right? So that was not. But on the other side of the coin is that we as the Western Union, we have many -- as you know, we have many accounts also. Our account payout in India was skyrocketing. So people are sending money to an account in a different customer segment but that added also additional customers on the received side because people were sending -- picking up money on an account. So account pickup was also very strong.

Great. And I guess on going back to the economies, yes, you've seen some improvements. You've seen the U.S. and the U.K. those countries provide stimulus to workers and citizens. Are you seeing that show up in the transactions and the trends? Like could you guys see it in the numbers?

Well, it depends really on the countries, right? Some countries have stimulus packages. And obviously, some countries have social net, which helps, given the stimulus packages, given that people are unemployed, people even get some money to send money. Yes, it helps. So we -- obviously stimulus package, but that's not the only reason. It's a combination of lockdowns. It's a combination of getting employment, and it's a combination of stimulus packages. It's a helpful part. But the other side of the coin, as we know, Ken is there's a lot of also not paid out stimulus packages, right? I mean there are a lot of promise. There are a lot of people but the operational part takes time until the money gets to the people. When the money comes to the people, they immediately, and we know from our customer survey, they immediately send money home. And that's one of the reason to support their families was the main driver of the Western Union. And the other thing which we asked the customers during that time, we say, why do you choose Western Union, why are you during this time? And the trust was a big thing. The trust on our brand that the mom in Guatemala or in Mexico or in Morocco gets the money that they can also during this COVID-19 time, pandemic times, they have real good trusted brands that can pick up the money.

Right. Yes. We -- yes, I guess we got one question from the audience here. And on your -- on the 1Q call, I think you mentioned about the World Bank forecast. They're calling for a transaction -- for volumes to be down 20% in 2020. You thought this was a little pessimistic, you could see it in your transaction trends down 30% peak late March, early April. So the question here is, could you touch on the most -- the World Bank's recent update on the remittance outlook? Any puts and takes from your perspective?

So I think we still believe that numbers are very pessimistic, the World Bank. We don't see it. The simple answer is, we don't see it. We have May, and we will give more color, detailed color on May in a few days. But from today's point of view, I just don't see that principal amount coming down, not in our business. I don't see those in the industry totally, that 20% because if that number is right, then the next 6 months must be a catastrophe, which I don't believe because this is -- opposite side, right, Ken? It's improving the transaction, improving -- and the people are -- once the lockdowns are getting easier and people are going back to the normal, the people do send money immediately, and we see improved trends. So I don't agree with that data. We have to -- it's one point of view, right? And their other forecasts are different point of view. And I believe also, as everyone, we are learning from that. World Bank will -- may update their data also and our customers are saying that they're going to support their loved ones, and we do our customer surveys also.

Great. I guess a question just on that and the health of migrants. So I mean, how do you expect migrants to emerge from this downturn? And like how are you thinking about unemployment levels, their level of earnings going forward? I mean, internally, are you expecting maybe a pickup in unemployment across that segment of the population?

Yes, it's a good question. It's -- first of all, COVID-19 is there only for 8 months -- 8 weeks or maybe made that impact, unemployment impact that may be well volatile, may change also. But it did impact our -- some of our parts, especially the service industry. And our many migrants, many customers are in the service industries that are driver or is it a hotel service industry, and they are working on that, did impact but at the same time, as I said earlier, in the parts of the businesses where there is a social safety net that brings the people back and they send immediately money. So the long-term unemployment rate, the people try to find a way to send money. I would say that it's hard to predict what will that impact to general -- to the general population. But one thing I know also that the migrants are extremely resilient. They find -- especially our customers, we call them heroes, they find always a way to support their loved ones. And even during the financial crisis, as you know, our transactions and our volume that didn't get that impact, but the rest of the -- because the migrants and the people find a way to make money and send to support their loved ones.

Right. Yes, it's a pretty resilient business because the money is going -- being used for necessities back home. So that makes a lot of sense. I guess...

You get that phone call from your mom, says, "Hey, I need money, a hundred," it's an emotional moment. You know that.

Yes, definitely. Yes. You definitely send the money to your mom when she's asking.

Yes.

So we got a similar question from the audience on just the health of your customer base. Aside from temporary lockdown driven shocks have you seen any negative volume impacts due to worsening economic conditions, i.e., customers losing jobs or being furloughed?

Not really. Not really. We didn't see big impacts on that. Most of the impact has been definitely maybe short-term impact, economical impact, maybe in the service industry, the people couldn't use getting yet their weekly loan package or all these things. But on a big environment, even during the volatility of the oil price, we didn't see an impact in the Middle East. It's a combination, I would say, we can't point out to one point saying that this has impacted. It's a combination of lockdowns and lower income of the people but once it's open, again, we see even in some parts, a little bit higher principal amounts, people sending back home, and they were really waiting to do the transactions.

And I guess a higher-level question, Hikmet, as you think through and beyond the pandemic, how do you expect your priorities to shift, whether it relates to cost-cutting or increasing levels of investment?

So generally, Ken, my strategy has not changed, right? I mean what we presented in last Investors Day in September 2019, we are very much focused on our digital expansion. And the digital expansion in COVID-19 had accelerated and that strategy is number one. That means also new customer segment, building this ecosystem and having a customer lifetime value, it's very important to Western Union. We have about 150 million current customers, 70 million of them are senders, half of them are senders, half of them are receivers. And in 200 countries and building that ecosystem, building that customer lifetime value is extremely important and a big part of that is through digital acquisition. Our digital acquisition, new customer acquisition, huge, and we know that the digital customers are more -- much more loyal than retail customers. They choose you and they stay with you, and they have also a need for additional products, it -- could that be an insurance, could that be additional loyalty programs, everything. And with artificial intelligence and building this data and having also dynamic pricing around the customer is something that we are very much focused, and we're going to continue to focus on that ecosystem. The second thing on the prioritization is definitely investing in the -- continue to investing in the technology. As we said in our Investors Day, we are moving to cloud. We are having one platform. We have a new -- we are investing in a new settlement system. And all these things will make them more efficient, will even make it cost-efficient to our systems and that investment, and we are continuing to commit it on our $150 million savings, $50 million of them coming this year. As you know, the business model is also ideal. It has a 60% variable cost, 40% fixed cost. We are very much focused on the fixed cost. But at the same time, we also see opportunities on the commissions, on the variable costs. And this will -- this priority is going to continue. And I'm pretty proud of the team, they are executing on that on the execution side on the court side. Now COVID-19 definitely impacted the revenues, right? We said that we're assuming a 2% to 3% revenue to get to a certain margin expansion. You can get to a margin expansion, has different FX, right? But the savings are there. Our commitment is on the -- to execute that savings is here. And that's the third priority and then I think opening our platform to third parties, the new partners like Saudi Arabia Telecom or Sberbank are here, are on the road that we have to connect them with our technology that will bring also additional customers. And the fifth one, as I said, is the expanding on the payments. The payments part is still -- you saw it in Q1 results, quite resilient business. Customers in the crisis are calling us. And especially there -- the stress of some competition, some smaller competition. The financial stress helps us to expand that also.

Great. Sounds like a lot of good opportunities going forward. Yes, I wanted to switch to digital because that's a big part of the story and 30% of your transactions were initiated digitally in April. So I guess, maybe you talk about how the company has positioned the digital business and where do you expect it to be in 3 to 5 years?

Well, I think we started early to grow our digital business. The journey started like 7, 8 years ago. So one of the biggest advantage Western Union has and others don't have is we are already in 200 countries. So to build a digital business, we already have many fundamentals. We have the licenses to be in a country, you don't have to apply. Then you have the compliance programs. You have the settlement programs, you have the connections. So it's hard for a newcomer to enter on many countries. With that, we are already with our westernunion.com business in 75 outbound countries and two -- sending money to 200 countries to 500,000 locations plus and then to 4 billion accounts. And the digital -- when you open your app in the U.S., for instance, you can send money to India, you can choose if you want to send money to any location in India, one of the 100,000 locations in minutes or you want to send money to an account in minutes to one of millions of accounts in India. You could choose your banks and we drop money in minutes there, and which is a huge competitive advantage. So on the digital side, that's going to continue. And see what happened to the digital is that we start to get new customer segments. And this new customer segment, we are building an ecosystem around them, keeping them loyal to us and truly giving them, as a customer segment, which makes us very excited. And the other thing is also the Western Union brand recognition is huge, 90%. We have a 90% brand recognition with the digital customers when somebody wants to send money globally. So next 2 to 3 years is definitely going to be digital first. Maximizing the ecosystem with the existing customer and really also giving them additional opportunities on the ecosystem. And on the digital partnership, we're going to continue to offer them our ecosystem, our cloud. A bank, for instance, have customers, right? They want to serve them better, a bank, but they have issues to use correspondence banking to send money to many exotic currencies. It's a hustle to use the correspondent banking. They are choosing more and more us as a financial institution to serve their customers in a better way. They white label that, they call it x bank transaction, and we drop money for them to 137 currencies, 200 countries in minutes. That's a huge advantage and that's going to continue to be a thing. So that new customer segment is very exciting for us.

Yes. Good. And as a friendly reminder, to the audience, if you'd like to ask Hikmet a question, you could submit a question using the pigeonhole link on the left side of your screen. So we have -- now that we're on digital, Hikmet, we have a few questions on digital from the audience. So the first one asks, can you give us some context on where digital customers are coming from? What corridors are popular? What services were they using before?

Well, I think that's a good question. Most of the digital customers, we believe, are coming from correspondent banking struggle from banking environment and -- but we do see recently also coming from some newcomers for money transfer. Most of the customers, though coming from banking environment, which it takes 3, 4, 5 days to send money and it's extremely expensive. And our capability to drop money immediately and in an environment, it's great. Then recently, we also saw some customers coming to us from the new commerce, new money transfer commerce because they do have some struggles to drop money in multi countries. And it takes longer. And there are some financial struggles. We believe that we are more active, especially during COVID-19, we have been very active, given our financial strength. We've been actively investing in the marketing. So that marketing investment, our marketing dollars, in general, has not changed, but we shifted from retail to digital. That helps with customer acquisition, new customer acquisition to our brand. And so that's the main reason why we gained so strongly in the...

Right. And in that investment on the digital side, are you -- and you said the customers are stickier. So are you willing to pay up to acquire that customer if that lifetime value is higher? Is that how you're thinking about it?

Well, generally, first of all, our customer acquisition costs have been lower these days. We get so many new customers, right? I think the team is doing a good efficient work to acquire customers. And obviously, if you have a base of $600 million already, and we are much bigger than the competitors in 2019. Growing there -- from there with that growth rate, obviously, gives also you the base to acquire new customers. So your question was more on what was it, Ken, your question?

Yes, just it's a stickier business, maybe they download the app and they stay with you longer. So are you willing to pay up more to acquire them?

Well, I think they are -- we are -- when they stay with us, we -- I think they are loyal. We don't have to invest more. They are loyal to us. And what they are asking sometimes there are additional products, and we are doing some additional products offers to customers, and we did -- we recently announced some insurance products for customers with third parties to keep them in our ecosystem. Could be one day more, we have a bank license in Europe, which these loyal customers could be offered with more products in the future. And that makes them even more sticky with us, and we know that once they open accounts with us, they will stay with us. So there are -- there's going to be some test there also with our European Union Bank.

Right. And what type of products would you offer besides insurance?

I think we are looking at -- it will be financial service products, obviously, which will be ideal for migrant customers. And that kind of product. We won't be a full banking, obviously, but it supports on the day-to-day customer, could be any financial, any payments products.

Great. Okay. Just a couple more on digital from the audience. The first one is asking about the take rate. So how does the take rate of digital compare to the physical retail business?

Well, the rates are same. So the financials are, first of all, almost the same, right? I think that the business is very similar, the big difference in the digital businesses, Ken, the funding methods. The funding methods, how you collect the money from the customer. In the retail money transfer business, the customer has to prefund the money mostly by cash. And in the retail money transfer business, the funding is done via credit card, debit cards or accounts. And we could see in the retail business, more and more customers are using debit cards and accounts to fund their transactions, which is more profitable for us even overall, right? And I would say that the business is on the -- for us, the digital business is quite long term, quite interesting, quite profitable. And on the third party, even, as you know, there is a different thing. We don't have to do the credit risk. We don't have to collect the money. Our partner collects the money from the customer. And so the good funds are given to us, to our partners. That's even with -- the risk is even there less so.

Okay. Makes sense. And then I guess another one on digital. What are the gross and operating margins, of the digital business?

Very similar to our retail business. As I mentioned earlier, the yields are similar, the PTRs are similar to our business. The revenue per transaction, principal per transaction are very similar. And we are investing, obviously, in the digital business, right? If you compare it, but overall, our marketing dollars has not changed, and it is very similar to our retail business.

Right. Okay. Makes sense. I guess I want to switch gears to the digital partners that you're working with. And I guess, it seems like this is where the growth is going to come from in the coming years. It's going to be one of the areas. So can you talk about the performance that you're seeing across these partnerships? Are they performing better or worse given what's happening with COVID?

So surprisingly better. We partnered, as you know, in the 2 bigs, I would like to mention that because they've been a longer partnership now over a year. And our Sberbank in Russia and Saudi Telecom and they were even during COVID, they've been performing -- accelerating their performance. So in -- there are 2 reasons why they joined us. One is the reason Sberbank wanted to provide their customers, which are mostly from the Central Asian countries like Kazakhstan, Uzbekistan, Tajikistan a better service, and comply with the regulator in a better way. They have chosen us a settlement compliance engine and dropping money in a very efficient way. And the customers are still Sberbank customer and is a great partnership with them, and we do the compliance and everything. They have chosen that. So the correspondent banking didn't work very well for them, and that's why they have chosen Western Union. The Saudi Telecom is a different story. They want to acquire new customers. And they -- their aim is to building the wallet and they have many migrant customers, especially from South Asia, in Saudi Arabia, like in Pakistan, Bangladesh, India and Sri Lanka. And they are acquiring them, and they want to offer them a second service. How do you send money from your wallet? And the best way to do that was Western Union, and they called it STC money transfer powered by Western Union, and they send it. Their performance has been amazing. It's still going very fast. We showed some charts in...

At the Investor Day, I think...

Investor Day, right, and that -- that we've been accelerating.

Right. And then I guess, as this becomes a bigger part of the business, I mean, maybe you could just touch on how integrated are you into their operations, right? Because I have to imagine the switching cost for them are pretty high. And they're probably -- are they looking at multiple providers? Or are you kind of just the one provider that they're plugged into. Like does that lead to better pricing for you in the long term?

I think technically it's definitely some -- it depends on the connection wise the implementation site could -- depends on the bank environment, depends on whom you are acting, how their technical environment is. But what they are looking for is really how they can serve their customers the better way. And they are looking at, do you have enough network in Tajikistan? Do you have enough network in Kazakhstan that my customers don't complain to me that I couldn't send money. They want to please their ecosystem. The same goes with STC. They want to acquire new customer, please their ecosystem. So they are really looking for a customer -- for a partner which can provide that international money transfer in real time in a way that the others can't provide and that's why probably they have chosen us. That's where we are going to the market. That's what we are offering to TD Bank in Canada or in a Swissquote in Switzerland, white labeling. That's what we are doing.

Right. And I guess, a question from the audience. Are you satisfied with the progress on winning white label business serving banks and other financial institutions? So I guess, maybe you could touch on the pipeline. I know the sales cycles are a little bit longer, but anything in the pipeline that investors should be on the lookout for?

Obviously, we do have pipelines, which we're going to announce when we have the press releases in the right time. It's not only signing an agreement, we -- normally we don't announce on signing a new agreement, we announce when we really do the first transactions. And as you know, as you said, Ken -- it takes -- in the financial institution, the integration takes longer because their system has to merge with our system, their compliance programs has to merge with our compliance programs, the settlement programs, and it takes a while, but it is. We have a team. They are on the road. They are in different countries, and we have even developed a digital and virtual sales team tools to implement that. It works pretty well, and we are making progress, yes.

Okay. Good. And I guess, we've got another question. Maybe we can switch gears to competition. Curious to get your thoughts on the competitive landscape. Are you seeing more or less competition from COVID? I think some of these smaller players are struggling given this environment. So that -- does that give you an opportunity to get more aggressive and try to take share?

So obviously, our financial position is quite stable, which makes us continue to do good business and invest in the business in the market. There are 2 questions on that. First of all, we don't see any pricing pressure generally. And we didn't see that pricing pressure over the last 2 years and I don't see it from today a pricing pressure. Obviously, it costs some money to do this business and many, especially in that scale, we do it, right? And many people understand that and obviously also moving money, it's not that easy. It's very complex. It's -- I always say thank God, it's complex because it gives us a competitive advantage to move money in 137 currencies. At the environment, I would say that there are some financially distressed companies around the world, different parts of the world. Small competitors are maybe in these days, are looking for additional investment money. I don't know how that investment money will be seen these days, right? But from -- we are active in the market looking to gain market share. Our operations is pretty good. And that's why we released also today with our confidence how the business is improving. And I just sent the press release this morning to be more open to speak to our investors and to the community openly about how our business is performing.

Correct. And I guess, trying to take share during this downturn. I mean is there -- do you have a preference for doing that organically? Or is there some way that you could maybe tuck-in an acquisition and acquire somebody who's struggling a little bit more?

Well, our priorities -- capital priorities have not changed. We are continuing to invest in the business as first one. We will definitely look at secondly to the -- to also definitely, dividends are very high on us, and our M&A is definitely also here. But while we are performing in the business, we continue to perform and gain market share there. It's not either/or, as you know, and if there is an opportunity which fits in with our strategy, which has the right synergies, which fits in with our growth strategy, we will definitely look at that also, especially when the multiples are getting more attractive, could be something that we will be more active.

Yes. Well, I see it looks like the multiples in the public markets are going up versus where they were pre-COVID, but we'll see. Another one from the audience, can you discuss how growth of digital is impacting new renewal split negotiations with independent agents? And so what are the trends for splits? And what's the outlook there?

The split?

Yes. I think it's more for -- like what are the agent commissions that you're paying when you go to do these negotiations with agents?

So generally, I think that most of our agents have been very loyal to us. And over the 20 years, they didn't change, and they've been -- this continues to be the case. And as you know, 20% of our agents network every year is in a renegotiation, right? So we are doing that constantly. And generally, I would not say that we don't see any big pressure from agent side that we may lose an agent or you have to renegotiate that or -- and especially also the 20% on the -- every year is new. And none of our agents are bigger than 5% of our revenue, right? I mean it is quite balanced, right? Our approach, and that helps a lot in the negotiations. So we can play the portfolio. But generally, I would say that the digital growth is also very welcome. It's some of the agents because it seems as an additional payout network. So you send money from an additional customer, you have additional transactions in India or additional transactions in Pakistan or in South Africa, you can pay out. And that's -- they see that as an additional transaction.

And a similar one from the audience, asking about the impact to agent locations over the next 2 to 3 years, given the challenges across retail. Like do you guys see that as a headwind going forward to the number of agent locations out there?

No, I don't see it because the retail locations, most of our -- if you look at our retail portfolio, 75% of our locations are banks and post offices.

So it's quite different than the U.S. investors?

Yes, it's more -- yes. You're absolutely right. Internationally, it's more financial institution, given the regulations. And I don't see any big changes there coming up. So the financial institutions, as they exist in retail, they will continue. We see more and more in financial locations in the banks using that both for digital and retail. So it's all about serving the customers. And look, if you look at our business, we never -- we, as Western Union never carried cash in our hands and put it to a location. We move always money in digital way and billions of dollars on digital way. Only the customer needs on the receiver side, give it as cash, pay as cash, we can pay out in cash. If the customer wants in account, we pay out in accounts in minutes. If the customer wants in a wallet, we pay out in a wallet in minutes. So that's huge. Not many competitors can do that in 200 countries like we do it.

Right. Yes. I guess on that point, as digital becomes a bigger part of the send side, but you still need that receiver network, right? Because 85%, 90% of transactions are still paid on cash. How do you think about -- would you consider partnering with some of these digital players to leverage your network? Like how do you think about that trade off, right? Because if you do, do that, you'll open up the top of the funnel, you'll get more transactions. So how do you think about that internally when you're making that decision, whether to partner with other players?

So we look at the customer segment, obviously, they have -- most of the digital players or banks have their own ecosystem. And the most important thing for them is their customer relationship, right? And they are looking for partners which could serve them -- their customers in a better way, which can add additional customers. Amazon is one example. We had that digital partnership with Amazon and have it. Sorry, we have this digital partner with Amazon. And we talked about that, it's really serving their customers in a better way. They don't have any other -- they don't -- can do it on their side. So it's also not our customer saying that it's a different customer use cases. I think that's going to continue to go. We don't see any cannibalization of our own business. We see it as an additional -- more additional customers, same at the STC. These are additional customers. They were not using in the past Western Union and then switched to STC. It's really the Western Union -- most of them are additional customer, right? I should not say 100%, but 80% of them are new.

Right. All right. I guess we got a few minutes left. Maybe just to touch on Business Solutions quickly. I guess how is this business holding up in this environment? I know it benefits from FX volatility, but is B2B holding up better than the consumer business?

So as we in Q -- we gave an update, Q1 update on that on our business -- B2B business. I think that during this time, we did see different approaches. As you see, we saw good effects of volatility to -- the business trust us, they use us during the crisis. They have their relationship. They really used, during COVID-19, they trust us, and I just had a review today with the team, they told me that the trust -- brand trust has been a huge factor that people are using us at the Business Solutions. Some parts of the business are do suffering like the student pay part or the other because the students are less traveling now, right? We are looking again, then -- the tuition payments will come back again. But that part has been a little slower. However, overall, I would say that the Business Solutions is well positioned.

Yes. All right. Good to hear. All right. We'll have to leave it there because we're just up against the 50 minutes. So thank you so much for joining us today. It was a great discussion. And thank you to our audience. Before logging off, please check out the Procensus poll in order to view sentiment from your peers. They'll ask you a couple of questions, and you'll have the media access to the poll results. And the link to that Procensus poll is on the left side of your screen. So thanks again, and have a good evening. Stay safe.

Thanks, Ken.