Market share in consumer money transfers & Facebook Libra update
Global market shares for cross-border payments
With 2018 numbers now signed off globally, we can begin assessing everyone’s latest market share. And with PayPal pulling out of Facebook’s Libra, is that initiative with its remittances dream now doomed?
To many Davids and one Goliath…
Let’s start with the obvious:
- Western Union remains far and away the dominant player in consumer money transfers. The top four incumbents account together for only 64% of its revenue and the four leading challengers together a mere 13%.
- Western Union’s margins remain the envy of the industry. Whilst WU’s FX flow value may soon be reached by the likes of TransferWise, the massive difference in margins means catching up from a revenue side is still a long way off.
- The Challengers are gaining market share but it is going to take a while and some serious effort to reach Western Union. If TransferWise grew 10 times as fast (lets say 5% versus 50%) year on year, TransferWise would catch Western Union in 2029.
What will we all be doing in 2029???
What next for Facebook’s Libra?
PayPal pulled out of Facebook’s Libra project this week. What next for the once hyped but now greatly troubled project?
Some observations:
- Facebook probably needed PayPal more than PayPal needed Facebook. PayPal has 277 million payments customers. Facebook may have 2.4 billion users but hardly any use it for payments.
- More and more companies are going their own way with blockchain technology. From R3 to Quorum to Ripple, there are plenty of platforms and providers to build off of.
- Financial services cannot be separated from regulation. Many of the highest valued payments companies (Visa, Mastercard, PayPal) benefit from not being regulated as banks. Given the zero chance that Libra (and its association members) would get a light regulatory ride, now may be a good time to duck out.
- It remains unclear that any of the use cases laid out by Facebook are critical or should necessary be solved using Libra. We would not be surprised to see Visa and Mastercard follow suit and exit Libra.
As Visa CEO Al Kelly puts it: “No one has yet officially joined. We’re in discussions and our ultimate decision to join will be determined by a number of factors, including obviously the ability of the association to satisfy all the requisite regulatory requirements.”
Cameron is Head of Platform Products at FXC Intelligence, where he focuses on pricing data within the FX and payments industry. He has written comprehensive reports about trends within the money transfer industry, and has previous experience with equity research and microfinance. Cameron has a MA in International Political Economy from King’s College London, and a BA in Political Science from The University of the South.
