Western Union

Western Union Brazil adding digital wallet: How many wallets can LatAm’s largest economy take?

Drawn by the rapidly expanding digital ecosystem, global players have increasingly focused on Latin America’s most populous economies as markets with high growth potential.

The fast digitization of Brazil, in particular, has led both fintech and traditional foreign companies to devise expansion strategies to serve the underbanked.

Most recently, Western Union, the U.S. money transfer giant, announced plans to deploy its digital banking offering in South America’s largest economy.

The company has been growing its digital offering amid the growing digital space and announced the acquisition of Brazilian virtual wallet provider Te Enviei to expedite the expansion of its digital offerings.

The company plans to enable clients to store funds by introducing its digital wallet in Brazil. Also, to send money overseas and domestically and pay bills. Through the acquisition, Western Union will likely speed up its planned technology-building process, enabling it to roll out its services faster in the region.

The launch, expected in the first half of 2023, will be the first for the US giant in Latin America. The company reportedly rolled out already similar services in Europe earlier this year.

An active presence in Brazil

Indeed, Western Union already has an active presence in Brazil. The U.S. remittance behemoth reports 1,200 locations in the country for cash transactions.

However, the fact that the WU already owns a banking license in the country paves the way for offering banking products through digital channels.

“Brazil is a strategically important and highly digitized banking market,” a spokesman from Western Union told Fintech Nexus. “Many Brazilians are looking for financial products to address their needs in a global economy.”

Devin McGranahan, president and CEO at Western Union, underscored the underlying opportunity in catering to its existing clients in the region.

“Latin America is a great example of the potential of our receiver base and an important growth market for us,” he said. The executive said that the region generates around $400 million in annual revenue for the company, yet “very little of that” is coming from receivers.

Remittances expected to grow

Devin McGranahan, CEO and President of Western Union.
Devin McGranahan, CEO and President of Western Union.

According to a Migration and Development report by the World Bank, the region will see remittance inflows of $143 billion in 2022.

This is up roughly 50% from 2019. Mc Granahan said the development of card-based and digital receive products could help Western Union take a more significant share.

“We believe activating this receiver base is a large, untapped opportunity we can capture while also continuing to grow our core business in the region,” he said in the latest earnings call.

There has been a sharp increase in the number of digital wallet providers in Brazil over the past few years.

The digitization of the economy is reflected in the dramatic growth of local players such as Nubank, PicPay, banco C6, Banco Inter, and Banco Neon, among many others. They have been able to sign clients by millions, ultimately drawing the attention of international players.

Multiple digital wallets

“There is a growing supply of digital wallets in Brazil and, with the phenomenon of embedded finance, in which companies from different segments start to offer financial services, we should see even more,” Bruno Diniz, a fintech adviser, said.

With such an active pipeline, there have been some concerns about whether the market could be close to saturated with so many digital wallet offerings.

For Diniz, a differentiation strategy will be vital to standing out.

“Working on differentiation and building an ecosystem (both financial and non-financial) will be an important element that will define the sustainability of these initiatives in the future,” Diniz said.

“Several players have not yet been able to demonstrate a distinguishing component – either by positioning themselves as an expert in a specific niche or as a kind of “super app.”

In the case of Western Union, it is expected that the company will hinge on what it does best. That is cross-border payments.

Western Union reports an online presence in 75 countries. It also holds a cash distribution network in over 200 countries and territories.

“Cross-border compliance is challenging and costly, and WU already has the infrastructure in place,” the spokesman said.

“We believe digital initiated money transfer remains a high growth area and expect it to be the major driver of overall market growth over the coming years.”

The spokesman said through the acquisition of Te Enviei. Western Union incorporated functionalities such as funds in/funds out capabilities, money transfers, and debit cards.

  • David Feliba

    David is a Latin American journalist. He reports regularly on the region for global news organizations such as The Washington Post, The New York Times, The Financial Times, and Americas Quarterly.

    He has worked for S&P Global Market Intelligence as a LatAm financial reporter and has built expertise on fintech and market trends in the region.

    He lives in Buenos Aires.