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

Good morning, and welcome. My name is Ken Suchoski. I'm the U.S. payments and fintech analyst at Autonomous Research. We're excited to have Western Union here at our 38th Annual Strategic Decisions Conference. And we're thrilled to have Devin McGranahan joining us today. Devin is the CEO of Western Union. Prior to that, he served as the Head of Global Business Solutions at Fiserv, which is the old First Data business. So Devin, welcome, and thanks for joining us.

Thanks. It's great to be here. It's been a great conference so far. So I really appreciate what you guys put together, the hospitality. The conversation has been great, so thank you.

Absolutely. We'll look forward to having a good discussion right now. Just one housekeeping item before we get started. We're going to do -- the format is going to be a fireside chat, so I'll kick it off with some questions that I prepared. And then we'll also be taking questions from all of you in the audience. So if you have any questions for Devin, feel free to submit those using the Pigeonhole link that's been provided. If you have trouble with that, just feel free to raise your hand and ask those questions, and I could repeat those, so that everyone can hear them.

So with that, let's get started. So Devin, this is your first time at Strategic Decisions Conference. Can you tell the audience a little bit about your background and what ultimately made you want to join Western Union?

Yes. So as many people know, I spent a career working in professional services. I did 25 years at McKinsey & Company. When I retired from McKinsey company, I found that retirement didn't suit me very well, so I needed to go back to work. So I joined Fiserv, which was a financial services technology client, taking over their payments businesses. And I spent close to 6 years there, honing my knowledge and my experience around fintech, around payments. That culminated with the acquisition of First Data in 2019, and I took over the merchant business, point-of-sale payment business globally around the world. As you think about the evolution, and I was spending a lot of time, as folks know Fiserv, First Data, own a business called Clover. Clover is a cloud-based, competes with Square. And we were starting to think about the dynamics of kind of the multi-interaction model between the merchant, between the bank and between the consumer. And you see others doing it, whether it be Block with the Cash App and with the merchant business or PayPal with what they're doing of linking those payment systems. And what I quickly figured out was the hardest thing to build in that 3-party model was the consumer brand, how many payment acceptance brands have been built in recent time. You've got Visa and MasterCard, you've got big banks. And then maybe you have PayPal, maybe you have cash apps, where you've got some other fintech. But building a customer brand around payments, exceptionally difficult, exceptional difficult, and we were trying to do it with Clover. So when the opportunity came to take over and lead 171-year-old company that has 92% brand awareness around the world, unaided brand awareness around the world, and a 100-plus million retail customers, that felt too good to pass out, right? Like that is a -- it is a thing that you can't replicate no matter how much venture funding you get. Yes.

No, absolutely. It's exciting times. And I think it's a good segue into what I want to focus on next, which is the digital business. So having focused on Clover, we're seeing that, that business grew quickly for Fiserv. So the digital business for Western Union has been a big driver of growth for the business. And I think that's really where we're headed in this industry. So can you just talk about how you're positioning that digital business? And where do you expect it to be in 3 to 5 years?

So one of the great things that I inherited is the market-leading digital business. We're a $1 billion digital business. We compete in more corridors. And we blend both our digital and our physical as many people know, the majority of digital remittances start as digital and end up as cash payouts. Many of my competitors rent their cash payout network from somebody else. We own both the digital business and the retail business. So it's a great franchise to start from. One of the things going back to that time with Clover and people were following the story, I also launched a business while I was there called Carat, which was the large enterprise integration between the digital and the physical because First Data had a great franchise around retail. They did Walmart, they did Target, they did -- but they didn't have as much integration. And what I learned through COVID is that there's no such thing as a purely digital customer or a purely retail customer. Customers actually choose the channel that suits their need at the moment, right? And so one of the things we've been talking about, given this great retail franchise we have in this $1 billion digital business, how do we bring those together in a way that other people can't and allows us to capitalize on what I call the retail to digital escalator. So as customers and in many places in the world, we're at different points of that digital evolution. So I was with our team in Malaysia just earlier this week. And Malaysia is still 75% retail. Sweden is 80% digital, right? So there are lots of places around the world where the migration from retail to digital is still happening, right? And so how do we leverage our retail business to drive our digital business? The future of the business will be digital or in my case, omnichannel. So everyone will have some form of an interaction with us digitally. But we want to capitalize on the uniqueness of our footprint in order to both drive the digital business but create really the industry-leading omnichannel experience.

Yes. No, that makes a lot of sense. Can you talk about the trends you're seeing from a union economics standpoint? I know there are a lot of smaller players, competitors getting into digital and growing very quickly, throwing a lot of sales and marketing dollars at the opportunity during COVID. Now we've seen things normalize a little bit, right, as economies reopen. So what are you seeing on the unit economic side, I guess, both on the digital business, which is the white label business plus wu.com and just, I guess, the wu.com business stand-alone?

So we basically have 3 distinct unit economics, right, for those. You've got the retail business, which has the highest revenue per transaction. It also has the highest cost structure, because we pay commissions on both in and out. And we're obviously managing cash on both ends. So there's lots of incremental investment required to do that in a 600,000-plus location distribution network around the world. Next is the Western Union branded digital business. And that has lower revenue but higher margins because we're only paying commission on one end, and we'll come back to cost of customer acquisition and how you manage that in that business. So while there's lower revenue and -- but there's higher margins. And I think when we exited Russia, and I think you wrote about this, most people saw the top line number of 4%, but we're surprised by the impact when I took guidance down by $0.15, they didn't realize, but that was a market that had gone 70% digital. The combination of our white label and our Western Union, where we are only paying one-sided commissions had a very beneficial impact to my bottom line. So the digital business is a good bit lower revenue per transaction, higher margin. And then you get to the digital white label business, which we continue to emphasize, particularly with large, strong partners and geographies like we had with SpareBank, like we have with STC. And that is the lowest revenue per transaction, but it's also the highest margin because there's no customer acquisition cost. There's no fraud risk compliance costs. It's all done by our partner, right? And so those different economics and the mix of them and people look at our transition through COVID, and they think there was a lot of price compression because our RTP went down, but it was actually driven more by mix than it was by price compression. And so really, the conversation becomes, and this is what I started to talk about in the earnings call last time, was how do you cost effectively acquire customers? And how do I compete with people who don't make any money because they have a different economic model. So I acquire customers cost effectively to drive my digital business and my digital white label business. And that's where we get back to the last conversation about leveraging that retail business to cost effectively acquire digital customers.

Absolutely. I wanted to dig into the new digital banking initiative that you guys are focusing on. I mean what does the product road map look like for that? And how should investors think about that opportunity?

I think first and foremost, investors should think about it as the transition from a transaction-oriented business to being a customer-oriented business. So going from treating every person, whether they're doing a digital transaction or a retail transaction as an individual transaction to moving it to an account-based model, whether that's retail or digital. And so that pilot and now launch is really about reorienting the customer, reorienting the company around the customer, the customer relationship and customer relationship value expansion. And that comes in 2 directions, right? First, that comes by increasing retention. So by launching the wallet or the bank, people then leave balances with us. We issue debit cards, they interact with us. They can do domestic money transfer for free like any other wallet-to-wallet app. It's who creates engagement, which creates retention. The second is then product expansion or addressable market expansion by bringing new products and services. By issuing debit cards, roughly half of the folks who are enrolling are taking a physical debit card. That allows us then interactions at the point of sale, brings interchange into the mix and allow some float on the balances. So expanding the value of the relationship, those wallet-based and bank-based ecosystems move us again beyond just a transaction into customer relationship management, customer relationship value and customer relationship value expansion.

Yes. And so that's really interesting. You have interest income on the balances. You're giving a debit card. I guess, are you guys capturing all of that interchange economics or you partner with somebody?

Well, so as you know interchange on debit in Europe is quite small. So nobody should get too excited about the interchange business I'm building in. But in other parts of the world, interchange is a real part of the economics. And so as you also know, we own our banking license in Europe. So we are the issuer where we capture all of the economic benefit associated with that. As we move into other parts of the world, we aren't going to -- we have banking licenses in Europe, in Brazil. We aren't going to go launch full-fledged banks everywhere. So in some cases, we will share some of the economics with doing this as Banking-as-a-Service with some partners. But that's going to depend on markets and regulations and licensing. We operate in 200 countries around the world. So they'll be different. Yes.

Absolutely. And then the WU+ initiative that you guys have, is that primarily going after the digital user? Or is there an opportunity to go after kind of the users that are focused on using cash as well? Because I think there's 9 million wu.com active users. So is that kind of the addressable market that you're going after? Or is it beyond that?

So as we speak right now, my new Head of Digital Banking is sitting at a folding card table at an agent location in Berlin. And the reason he is sitting there is we have hired -- we've done a deal with 9 of our agents in Germany, and we have hired local market promoters to enroll our retail customers into the digital bank. And so we are incenting our retail distribution to help us grow the bank in Germany and not just the digital customers we already have and can attract in Germany, but in our physical retail footprint.

That's really interesting. So that's a way to essentially lower that customer acquisition cost in the digital channel by leveraging that physical retail network.

Right. And surprisingly, we approached 10 of our distribution partners, 9 of them said yes. And they said, yes at an economic incentive that I'm pleasantly surprised that they were that willing to participate for that level of economics. Yes.

And just one last question on WU+ just because there was another press release out, I think, last week on it. I think the transactions from WU+ users to other WU+ users are free. And I guess, is that a way to drive adoption and get other people to leverage that opportunity? Or -- and then I guess the other question is, from a monetization standpoint, what does that look like if those transactions are free? Are you hoping to get them into the user experience and then they're transacting with other people who are not using WU+?

So it is a enrollment exercise, right? So if you want to send money to somebody, they actually have to be part of the ecosystem. So we get our centers to enroll our receivers, so then we get 2-sided network. The second, it is in a retention and engagement. So now you have a reason to interact with maybe on the next time you want to send money to somebody cross-border. And the money stays in my ecosystem until somebody decides they want to take it out. And so when they take it out, there's economics, whether they want to take it out in cash or they want to transfer it someplace else, right? So as long as the money stays in my ecosystem, the free to free doesn't have much impact on what I'm doing. So we're getting enrollment. We're getting engagement and then we're managing the economic model on the cash in, cash out, money and money out less than the individual movement, right? And remember, a bunch of my economics, particularly when somebody wants to move money across borders is all around managing the exchange, right? It's all about changing euros into pesos or changing dollars into Swiss francs or whatever, right? So those economics all still stay.

Yes. And Devin, are there other opportunities to add products to this offering? So you're earning interest on your balance, you have a card, Square and Cash App you talked about adding lending, for example, in Cash App borrow. So are there other opportunities to attach additional products to that offering?

Certainly, if you play the strategy forward and you look at the long-term road map, there's lots of opportunities, right? So when I go back to what I said, which was changing the company's orientation from a transaction to a customer, once you have a customer, the natural inclination is, well, what else could we do for that customer, right? And so the road map of possibilities grows as we grow the ability to have customer relationships. And yes, logically, lending, my customer base is most difficult thing is gaining access to credit. And certainly, that's something we will think about. However, I've been around long enough to know this is not the time in the credit cycle to go into the lending business. Those assets will be a lot cheaper a year from now. So maybe next year, when we do this, I can talk about what we're going to do in lending. But in the short term, it really is about building the ecosystem, putting the wallet infrastructure in place, getting senders and receivers to enroll and start treating them like customers, increasing retention and growing payment revenue streams, and then we can think about other financial services and products as we develop that out.

That makes sense. And do you guys have a lot of that infrastructure in place already? Is there anything that you have to do on the front end or the back end? Or is it you've invested in that already, and so it's a pretty easy and seamless rollout?

Look, when you operate in 200-plus countries around the world, each of which has their own unique -- this is one of my superpowers that prevents a bunch of other people from eroding by business, but it's also one of the things that makes it challenging, right? So what the regulation for how to manage a wallet in Brazil is different than it is in Malaysia, it's different than it is in Japan. It's different than it is in Australia. So we have to take what we're building and then localize it and then connect it. So all of those things -- by the way, we're quite good at, which is why we operate in 200 countries, and we're licensed, and we have a great compliance system and we have a great regulatory management system. My scale is my advantage, and we're going to leverage that. But this is not just snap a finger and all of a sudden you have a global network and -- by the way, no one has a global network in 200 countries that they can easily move money like we can, right? So yes, there's some build, but it builds on a foundation that nobody else has. Yes.

Absolutely. Devin, I wanted to get your thoughts on the long-term impacts from COVID on the remittance industry. Can you just share some thoughts on how the migrants who shifted to initiating transactions online? I mean, how are they conducting their transactions today? Do they go back to sending money at physical locations? Or is that shift to digital that's pretty sticky in the data that you see?

So there's 2 populations we should talk about, right? During COVID -- and as the industry leader, we benefit from that 92% brand awareness. So if you have an emergency use or you have a temporary use or a one-time use, we accumulate a lot of that because people know I need to send money, I can send money with Western Union. And during COVID, we accumulated a bunch of that, right, and you can see it in our numbers in the second quarter of 2020 and the third quarter of 2020, people were trapped and they needed to do something, right? A lot of that has trickled out of our system, a lot of that kind of what I'll call COVID-specific use case that spikes stuff up. And so then you're left with the base of the business. And I get asked this question a lot. So we've gone and looked at it less than 1% -- or less than 2% of our customers have returned to retail. Our digital customers, they exclusively went back to retail. In fact in the last call, I actually talked about 2 other statistics that are quite interesting. In 2021, so well past the kind of one-time COVID stuff that has trickled out, 30% of our customers who transacted with us digitally did their first transaction with us in retail. So that migration of people who moved from retail to digital. And by the way, we did not influence that at all. We didn't put any marketing dollars for the matter that stuck through 2020, right? And then 15% of those customers that interacted with us digitally also did a retail transaction. They were still doing retail and digital transactions. And really interestingly, that group of omni-channel customers are twice as valuable as someone that's pure retail or pure digital. So this idea of having customers who can move across channels and who when they have a need to use the retail channel when they have a different need, they use the digital channel. That customer group is unique to us and highly valuable. And we got -- we saw that in COVID as people migrated to using digital because they were trapped in their house or whatever, but they still stayed as a retail customer for other types of transactions.

Yes. That's really interesting. So the user that's using physical retail and digital is twice as profitable. Are they just doing more transactions, are they doing higher amounts, like how do you get to that twice as profit?

They generally are doing more transactions that have slightly higher value, but it's more transactions. There are more engaged customers.

Right, okay. I wanted to -- maybe we could touch on account-to-account because I believe the last update that you and the team provided was that this was a $200 million kind of run rate revenue business. Where does this business stand today? And I guess the key question is, how is it differentiated versus peers?

So this is a great business for us, right? And it alone is of a scale of some of my digital competitors or a bigger scale. I mean, it's a $200 million business. It's growing rapidly, and it's very profitable. So it's a great business. We're continuing to emphasize it. We have something called the account payout network that I think is approaching 3 billion endpoints in terms of the accounts that we've enabled around the world where you can send account-to-account. And so, we see this as part of our future and part of the mix of who will serve. Now ours is different than say Wise's or someone else's who is predominantly doing higher principal white collar, developed country to developed country. Our account-to-account looks like the digital version of our Western Union branded business. So similar principal, similar transaction volumes but it is in similar corridors. So moving in our same corridors, but instead of ending up in a cash payout, it ends up in a bank account, right? And so that, and we see that as, again, this digitization of our retail base. This becomes an important element as people move in these markets to being more bank, to being more digital. And remember, our account-to-account also includes wallets. So we've enabled a large quantity of digital wallets. And in places like Asia, people don't actually have bank accounts. They use digital wallets, right? And so, we can send a Paytm, and we can send to Wecash. We can send to those folks who are now living in wallet-based ecosystems as part of our distribution network.

And just on the quality of that business, I mean, do you guys think of that as a higher quality business relative to physical retail? Just curious to get your thoughts on, I guess, the barriers to entry.

It's like asking me which of my children I like. Look, it's a great business, right? It's a great business. It's $200 million of $5 billion, right. So if I could magically make it $4 billion, it will be fantastic. But it's a $200 million business. We see it as an important part of our future. We see it as that continued evolution between retail. Remember, on Western Union branded digital, 80% of the payout of that $1 billion, right, 80% of the payout goes to cash. So that business will evolve to be more account-to-account, and we're going to grow that business. So this is an important thing for us to continue to communicate and for investors to look at. But it's still only a $200 million business.

Yes, absolutely. You kind of touched on this earlier, Devin, but just I think using that retail channel to drive better acquisition cost for that digital business, I mean how are you thinking about really leveraging that physical network to do that and to lower that customer acquisition cost?

Yes. So once you wrap your mind around the idea that you're going to integrate your physical and your digital, you then open up a whole realm of possibilities. So people have heard me talk about us investing in our retail point of sale. We're going down a path where we are going to replace our physical point of sale with a version that rides on our new digital architecture, what we call RF4, right? And so by definition, we will then create a platform that is seamless at the point of sale and at digital, right? That allows us then to offer same loyalty programs. That allows us to push the customer account management. That allows us to do a lot of things in the retail environment that makes it easy for a customer to transition from retail to digital, right? It also starts to bring in the ability for my sender community to enroll their receivers -- and we talked about the why free -- to enroll the receivers into the ecosystem, right? Because we're making that easier now in the receiver markets. So when you start to blend how you think the technology works, how you think the marketing works and how you manage the customer experience. And remember, the company kept these very distinct for good reasons, right? We were worried about cannibalization, as I told you, the revenue per transaction is a lot higher, not a lot higher -- is higher in the digital business or in the retail business than in the digital business, but the margins here are better. So there is some management of what happens as you have migration from retail to digital. But once you cross that barrier that you're going to do it, the opportunities to capitalize on it increase.

Yes, absolutely. Devin, so digital is becoming a bigger focus, I think on the send side and the receive side. You mentioned most of those transactions are still paid out in cash. You're doing the digital partnerships, but would you ever consider partnering with any of these digital players to leverage your network, because you do have over 600,000 physical locations. Presumably, this would open up the top of the funnel. So just curious, how would you think about that opportunity, opening up the network and really tapping into that?

Yes. This is a fantastic question. I'm going to make these guys really nervous right now. If you believe your superpower is your brand and your ability to cost effectively acquire customers to that brand, leveraging your infrastructure to generate economic value that allows you to spend more money to acquire customers with your superpower is a good thing. But I came from the merchant business. If people followed that story, they would know that Fiserv First Data processed for Adyen, processed for Square, process for a bunch of people who you would at face value say our competitors. So we're open to ideas. I'm open to ideas that leverage our network, that create economic value for me, because I am indexing the company on our branded business, driving branded customer acquisition, accelerating branded customer value. And if somebody else can ride on some of my rails and I can earn economic rents from that, and I don't think they can compete with my brand, that's interesting. Now if I think they're competing with my brand, I might be less interested in that deal. But there are plenty of people who could use our cash in, cash out network who are not competing with my brand.

Devin, I believe you mentioned -- I think it was last earnings call that you wanted to position the business for sustainable growth. And I know it's still early days, but can you talk about your appetite to invest a little bit more, maybe take the margins down a little bit to drive transactions growth, drive revenue growth? Just be curious to get your thoughts on that, because we get that question.

You guys love that question, like everybody asked me that question all the time. The answer is, please join us on October 20 in New York for our Investor Day, and I will gladly talk to you about our medium-term expectation for margins. Europe also bright, right? But the valuation of the company is a function of G, and particularly, it is a function of Terminal G, right. I currently have a valuation that's lower than I would like. So I'm going to focus on Terminal G.

Okay. We'll look forward to tuning into that. That was October…

October the 20th.

20th, okay.

Here in New York City.

New York, okay. All right. Great.

We look forward to a big crowd.

Absolutely. Look forward to getting your updated thoughts on the business and plans to drive growth. Devin, maybe we could swing to the white label partnership side of the business. I know the company shutdown its Russian operations. SpareBank was obviously a big chunk of that. So as you mentioned earlier, higher margin, greater impact to earnings. How are you and the team thinking about replenishing that pipeline and I guess what's the opportunity on the white label partnership side?

Look, one of the things we've come to understand is that when you have the right partner, when you have a Spare -- when you have an STC, someone who has a natural customer base, who has a technological bent or orientation to how to drive that customer base, they're a great partner for us, right? And we can aggressively and profitably grow with companies like those. And so, we are on the hunt and hopefully, we'll have some ability to communicate a few things here in the near future. On the hunt for partners that look like that. One of the things we've also come to the conclusion of is enabling large quantities of small financial institutions is a time-consuming and expensive process that has limited revenue growth potential, right? So we're going to move a little bit away from what was previously called F5 Connect and trying to light up lots of small financial institutions and focus on hunting big partners with market prominence with big embedded customer bases that can ride successfully on our rails and that we can do it at scale.

And is that just because there's some integration work on the back end?

There's integration work. Every bank has their own risk and compliance system. And look, any given small institution just doesn't do that many transactions, right? And so, the lift for the reward is just -- it's too high, right? And we got to accelerate growth, we need things that come in big chunks, right, like we're a $5 billion business. So that means you got to get big chunks if you want to grow this thing. And lighting up lots of little things that don't grow that much, it's going to be hard.

Yes. And just a follow-up on that point, Devin. I mean the integration, landing that big fish, I mean, does that create switching costs? Is it -- and once that bank does that integration with Western Union, are they less likely to add another partner, less likely to switch because there was that kind of upfront lift?

Certainly, right, like if you think about how integrated we are with STC, in fact, we're actually an investor in STC, right? Like these are deep partnerships where the bank and we are -- remember, they also, in many cases, are riding on our retail payout network, right? And so even though it's STC, the customer knows to tell their person will walk into the Western Union. So it becomes a co-branded experience, even though it's "digital white label". Like, if you actually go on to STC, we call it digital white label, but the button actually says use Western Union, because they need the customers to know where they can pick up the money and STC doesn't have branded locations all over the world, right? And so it becomes a very integral partnership that if they want to add somebody else or they want to switch somebody, gets confusing to tell their customers, "Hey, we used to tell you to walk into Western Union, now we want you to walk into XY and Z," right? So it becomes embedded.

Right. That makes a lot of sense. I'm going to read a question that we received from the audience. If you guys have any other questions for Devin, feel free to throw them into a Pigeonhole or just raise your hand, and we'll call on you. But yes, the question reads, "Can Western Union's brand effectively migrate up market to a higher income demographic or is that where Square competes more effectively?"

So we should -- first, our customer is predominantly a migrant. Many of our customers are lower socioeconomic status of migrants. Remember, our 9 million customers who do the digital transaction are fully banked. The only way you can do a digital transaction with us is you have a debit card or credit card or a bank account, right? So we should somehow dislike the fear that our customers are all these marginally banked or unbanked people, right? Our brand has exceptionally strong recognition, particularly outside of the United States in markets in which we have played an integral role in the remittance business for years and years and years and years. You don't have 600,000 locations without people understanding who your brand is and what you do. The way we think about our customers is at the center is people who want to send money cross-border. We don't define it economically. We say its people who want to send money cross-border, mostly because they're migrants. The next set of customers are the people who are receiving that money. So the 70-plus million people around the world who get money through the Western Union system, again regardless of socioeconomic status. There's in the communities that those people live in, i.e., because they're generally migrants. They affiliate kind of with the nationality of which they have come from, again, regardless of socioeconomic status. And then you have the general population, right? And so we tend to think of our customers in that basis, and we have varying degrees of socioeconomic status on senders, receivers, sender and receiver communities before then you get to the mass market population.

Got it. That makes sense. One other question that we received from the audience, "Just how can you drive better omni-channel penetration moving forward?" I think that kind of hits on some of the things you were highlighting earlier. "Are there any specific initiatives that you've seen work better than others or is it still early days?"

In the order in which they are impactful: Economic incentives to our distribution, technology integration, marketing messaging, loyalty programs. We're working on all of them, but giving our retail partners and incentive makes a huge difference.

And that would just be -- if they sign up for digital, you're going to give them ex dollars or…

Right.

Okay. So it's a one-time fee. It's not…

Varies by partner, it all gets negotiated, right? And we do it all, what is the alternative, how else would you acquire a customer, what's that cost compared to the cost of incenting. But in essence, someone can monetize the value of a relationship quite easily. And by the way, it doesn't mean they lose the relationship, right? So good incentive structures can drive a lot of omni-channel integration.

Right. So that physical retail, that agent essentially, you're not being penalized if you encourage them to join the digital platform. They're incentivized to do both, I guess?

That is correct.

Yes. Okay. I guess Devin, maybe switching over to pricing, since we have a 10, 11 minutes left. Over long periods of time, we've seen in the industry, there's been some pricing pressure. I think we've seen more stability recently. Is there a point where the declines stop altogether or decelerate when it comes to pricing? And if there is, how far are we from that tipping point?

Look, I think you can continue -- remember, we talked about this earlier, which was mix shift on realized revenue, right? And so when you're talking, pricing is an interesting topic versus what people see in our -- we're at about 4% today. It's down from about 5% pre-COVID. That is largely mix driven. As you know, the World Bank has said they want to get to 3%. So you're going to continue to see as the mix shifts and as pressure comes, it's a very competitive business. There's going to be some compression and the impact of mix shift, right? I think we should all expect that. I think to your point, it is abating relative to what was happening and the air coming out of the growth at any cost model that many here in New York and on Wall Street were encouraging, bodes well for people like me because now my competitors act more rationally than maybe they had been acting in the past when they were getting economic returns for irrational economic decisions.

Yes, absolutely. Money is no longer free.

Money is no longer free.

Okay. So and you have, I guess, a broad perspective within payments, right? So if we look at that 4% take rate, you mentioned the World Bank at 3%. I mean you look at the network fees in MasterCard, they're getting about 20 basis points. You look at like Fiserv or Clover, getting maybe 50, 60 basis points on payments. I guess is the long-term trend just kind of down towards that just because that take rate is so juicy? I mean it seems like it's going to take some time, but I'm curious to get your thoughts on that.

Having lived in those worlds, right? Those are processing businesses. Those are B2B, sometimes B2B2C businesses, and I had the pleasure of sitting on the other side of Walmart and negotiating. That's not a place you want to be, trust me. When you have a consumer business, so the reasonable things to look at is what do banks make on a customer relationship? What does PayPal make on a customer relation? When you own the consumer relationship, what is a reasonable return and pricing to expect for having acquired the customer, manage the customer relationship? By the way, you are facilitating a payment transaction. So you're running a network and you should benefit from the network economics that are associated with that. But you're not a processor, right? And so part of also the shift that I'm taking the company on is we are moving down more of the path of being a processor and exactly what you said, the economics of processing. As I said, the revenue per transaction of digital white label is the least because you're the closest to being a processor because somebody else owns that customer relationship.

Right. All right. I think we have about 7 minutes left. So I want to hit on -- you're relatively new to the CEO position at Western Union. You've taken a fresh look at the company. I mean what are some of the scenarios that you and the team have considered to really reaccelerate that revenue growth and transaction growth of the business?

Look, we've talked about 3 of the really important ones here, right? Growing our ability to move to a customer orientation and a wallet-based ecosystem, right? That allows us to enroll senders and receivers, increase retention, increase transaction value. Second, expanding our ability to compete at that retail point of sale, particularly as our network has gone more and more independent. We've lost exclusivity over time in many places. We need to be an aggressive competitor at the point of sale with our retail competitors, right? And then the third is how do we bring the benefits of this whole retail to digital thing to life, right? Because that is the elixir that will power us in ways that particularly my digital competitors can't match.

That makes sense. Maybe we could touch on the physical retail business because it's still a big chunk of the business. We haven't talked about it in a lot of detail. But when we try to do some of the math, and just look at that physical retail business standalone, it looks like transactions are still down versus 2019 levels. Is there a chance for this business to improve over time? And I guess how are you thinking about the growth in that physical retail business?

So you got to basically parse the world into 3 buckets. Bucket 1, Western Union has a historic and significant position. U.S. to Mexico, U.K. to Romania. Those businesses are large and relatively stable. We can't influence those that much. Second bucket, places where we have strength. But for whatever historical reasons, so the #1 corridor out of the United Kingdom is to India. We have an exceptionally strong business in the United Kingdom. We just signed the U.K. Post. It's #7 for us, okay? So then you say there's a bunch of volume going from the United Kingdom to India, that's not going on us. So how do we go get some of that out of the retail business, okay? Same thing, U.S. to Mexico, we're quite strong. U.S. to Guatemala, Guatemala is like a $16 billion principal, $13 billion principal. It's a big corridor, very small for us, right? So second bucket is looking around the world in that retail footprint, where do we have retail distribution -- but we, either for marketing reasons, for incentive reasons, for pricing reasons, have not capitalized on our ability to capture that. And then the third bucket on the retail side is just new ways of doing business, right? So I was in Rome last week. We've launched something we call the concept store, which is one of our agents takes over a physical space, completely brands it Western Union. It's exclusive to Western Union, and we target a specific community. So in Rome, we're targeting the Filipino community, Italy or the Philippines is a big quarter that we're underpenetrated in, launch a specific concept of Western Union branded distribution to go tackle that market. So new and innovative ways in the retail environment in which to compete.

Okay. Maybe we could switch to capital allocation, Devin, with the last few minutes that we have here. Maybe you could talk about your preference for buybacks and dividend, so returning cash to shareholders versus doing M&A? And I guess, are there any pieces of the portfolio, either geographies, product, et cetera, that you would like to expand and build on?

I always love this question, right? So having spent almost 6 years at Fiserv, I think Fiserv got built up with 161 acquisitions up to the time that I left. But I think anybody who ever invested in Fiserv know we were a very aggressive and religious buyer of our own stock. So these, to me, are not trade-offs. These are ways in which you manage capital appropriately, always with a focus on ensuring the shareholder is front and center. So if you buy -- if you do decide to allocate capital to M&A, it's against a benchmark of what would the benefit be to returning that to the shareholders versus doing something else with it. So look, we're going to invest in our business. We're going to pay our dividend. And if we have extra left, we'll buy back shares, right? We are going to be shareholder-friendly. We've historically been shareholder-friendly. We will continue to be shareholder-friendly.

Okay. And you mentioned reinvesting back into the business. So what areas are you prioritizing over the coming years when it comes to reinvestment?

Well, I think we've talked about it much of that, right? It is building out this ecosystem, bringing that 2-sided payment customer orientation around the world. It's bringing products and services like issuing debit cards as you even went down the path, maybe it's go so far as bringing lending into those, bringing those products -- by the way, we don't have to build on those. We can partner with people. Once you have that customer orientation and you own the customer relationship, lots of people are interested in bringing their product into your customer base, right? So one of the benefits of having that customer orientation and creating access allows us to monetize it without necessarily have to building it to ourselves.

Okay. Maybe last question, because I see the clock ticking down to 1 minute here. You've obviously taken on a big role, CEO of Western Union. You've taken a fresh look at the business. The business is trying to shift to a more omni-channel type of approach. You obviously have a lot of experience at other payment companies. So just reflecting on your previous experiences and kind of contrasting them with what you're tasked with in this new role, are there any past examples that you're reminded of? And just can you share how you overcame those challenges, what you learned, et cetera?

Yes. So I'll go down 2 paths, right? And I think we've touched on both of them. In the Clover, Carat experience and prior to that, great technology, great customer experience oriented technology like what we were doing with Clover or what we were doing with Carat, that wins, it wins, right? So building and orienting the company to be technology first, to have a customer focus on delivering that technology, being able to rapidly innovate and deliver technology, that's a winning solution in these kinds of businesses. And so we're taking the company on that journey. And I think that's a winning idea. The second is, and you heard me before, I wish I had a brand when I was back there. When I was at Fiserv, we were B2B, we sold the banks. When I was at the merchant business, we were B2B, we sold the merchants. I have a brand, right? I have a globally recognized world-class brand. And so that is a big difference from all the things I was trying to do to what I now can do in terms of being able to leverage that to grow the business.

Absolutely. All right. I think we'll have to leave it there. Devin, it's great to…

Awesome. thank you so much. Appreciate your time.

Thanks for joining us, and it's absolute pleasure speaking with you. And thanks to everyone in the audience. Thanks for your good questions. Have a great day and enjoy the conference.