MoneyGram International Inc (NASDAQ: MGI) Q4 2019 Earnings Conference Call
February 25, 2020
Corporate participants:
Stephen Reiff — Head of Corporate Communications
W. Alexander Holmes — Chairman and Chief Executive Officer
Larry Angelilli — Chief Financial Officer
Analysts:
Ben Budish — Barclays — Analyst
David Scharf — JMP Securities — Analyst
Mike Grondahl — Northland Securities — Analyst
Kartik Mehta — Northcoast Research — Analyst
Bob Napoli — William Blair — Analyst
Tien-Tsin Huang — J.P.Morgan — Analyst
Presentation:
Operator
Good morning and welcome to the MoneyGram International Incorporated Fourth Quarter 2019 Earnings Release Conference Call. [Operator Instructions]
It is now my pleasure to turn the floor over to your host, Stephen Reiff, Head of Corporate Communications. Please go ahead, sir.
Stephen Reiff — Head of Corporate Communications
Thank you. Good morning and thank you for joining us today. On the call with me are Alex Holmes, Chairman and Chief Executive Officer and Larry Angelilli Chief Financial Officer.
On the MoneyGram Investor Relations website, you can find our earnings press release and presentation, which is intended to supplement our prepared remarks during today’s call and to provide the reconciliations between GAAP and non-GAAP financial measures.
We will refer to non-GAAP metrics on the call. The non-GAAP financial measures should not be considered as a substitute for or superior to those prepared in accordance with GAAP. They are included as additional clarifying items to aid investors in further understanding the Company’s performance in addition to the impact that these items and events had on financial results.
Please also note that today’s call is being recorded. During this call, we will be making forward-looking statements, which are predictions, projections and other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today’s earnings press release and the comments made during this conference call and in the Risk Factors section of our Form 10-K, Forms 10-Q and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement.
And with that, I’ll turn the call over to Alex.
W. Alexander Holmes — Chairman and Chief Executive Officer
Great, thank you. Good morning everyone and thank you for joining us today. Before we dive into the details of our fourth quarter results and provide an update on our 2020 strategy, I wanted to start by highlighting the progress of our digital transformation and the new MoneyGram that has resulted from the last few years of modernizing the organization and building and launching digital capabilities.
We feel that our digital transformation is at an inflection point, as we have largely address the main challenges from 2016. First, we’ve lessened our dependency on major partners and invested in international market expansion. We’ve also diversified the business by growing our direct-to-consumer digital channel. Second, we’ve completely overhauled our legacy technology systems, implemented modern service-oriented architecture, published the industry’s best APIs and has started the second phase of our cloud migration journey.
Third, we have invested to build the industry’s best digital capabilities, and this direct-to-consumer digital channel is rapidly gaining new customers in markets around the world. Fourth, we’ve also modernized our back office operations to streamline processes and focus on digitizing each customer touch point. Through our efforts, we have reduced our annual non-commission operating expenses by over $150 million since 2016. Finally, we’ve implemented cutting-edge technology and compliance standards to derisk the business and lead the industry in protecting consumers with our DPA work streams on track.
I’m pleased to say that, today consumers around the world are now seeing and experiencing a new MoneyGram. A MoneyGram that is more dynamic and better positioned to meet the changing needs of consumers. We are now a modern mobile API-driven organization. Our core assets and strengths combined with our growth strategy, while able to lead the evolution of digital P2P payments and deliver strong results in the years to come.
Reflecting back on 2019, it was certainly a pivotal year for us. Customer experience improvements for the year included the strong growth of our mobile app, launching Visa Direct, redesigning our website, expanding our loyalty program internationally and increasing personalized communications. These customer experience improvements in addition to launching digital capabilities in new markets has also significantly accelerated MoneyGram’s digital growth.
We now have digital capabilities in over 65 countries and the best digital user experience in the industry. Importantly, we reported record online digital transaction growth during the 2019 holiday season and I look forward to highlighting additional growth rates in more detail shortly.
International markets were the other main growth driver in 2019. International markets in the fourth quarter comprised 62% of our money transfer revenue, maintaining strong momentum with revenue growth of 3% in the quarter.
2019 is also a year of building and modernizing. In September, we appointed a COO and repositioned all of IT, product marketing and back office operations under one function to better serve the needs of our customers. These efforts have created further efficiencies and synergies, which are driving a more agile MoneyGram.
All these initiatives have helped reestablish our competitive position and enabled us to return to global transaction growth in the month of December. Importantly, that momentum continued into the early part of this year with January transaction growth accelerating from December. We’re also pleased that adjusted EBITDA for the fourth quarter exceeded our expectations.
For the past several years, we have focused on geographic diversification through international expansion to better align with global cross border P2P market growth rates, and pursue higher margin corridors. In the fourth quarter, our international business maintained strong momentum with 7% year-over-year transaction growth and 3% revenue growth, as I mentioned earlier.
We have also focused on channel diversification and on capturing a larger share of the high growth mobile P2P market by building the industry’s best digital capabilities and quickly rolling those out to international markets. With a strong 36% transaction CAGR since 2011, our direct-to-consumer digital channel accounted for 22% of all money transfer transactions in the fourth quarter.
As a result of both our strong digital and international growth, in December, we were able to report total money transfer transaction growth of 2% on a year-over-year basis. The growth in our direct-to-consumer digital business has been driven by reaching an almost entirely new consumer demographic, and primarily consumers who are younger. Simply put, these younger consumers love our digital capabilities and specifically our app, which continues to exceed our expectations and deliver a strong return on investment.
In 2019, the app was downloaded 1.6 million times and now 80% of all online transactions are done on a mobile device. Excitingly our online customer retention rates are strong and these customers are averaging a higher number of transaction per month as compared to our walk-in customers. In the fourth quarter, online growth in international markets posted an extremely strong transaction growth rate of 113%.
Our digital transformation has also strengthened our walk-in business as we have worked hard to improve and fully digitize the agent experience. We continue to quickly roll out our new web-based point of sale software along with the industry’s leading APIs. Our new best-in-class user design, which agents love can be evidenced by the strong improvements in agent satisfaction scores that we are receiving.
In 2019, we also signed important renewals in the US, extending contracts at both Walmart and CVS, and we also initiated efforts to revamp our market presence in many regions around the world. These efforts have been supported by an increased investment in our sales organization, as we’ve added experienced talent in key markets.
Turning now to our update, corporate strategy slide, Slide 9. The industry is dynamic, consumers are changing and we are changing too. As we continue our transformation in 2020, we are relentlessly focused on delivering a differentiated customer experience, accelerating digital growth, being the preferred partner for agents and evaluating new revenue streams. We believe these market specific strategies will enable us to win in the market and continue to lead in the evolution of digital P2P payments.
Now, as I mentioned earlier, our direct-to-consumer digital business is reaching an almost entirely new younger consumer and achieving strong customer retention and productivity rates. These strong customer retention rates have been driven in part by the continued success of our loyalty program.
In the US, for example, once an individual joins the program, customer productivity increases by 20%. The loyalty program is currently live in 12 countries with over with over 30 more countries on the road map to be deployed in 2020.
From a new customer acquisition perspective, we have a number of initiatives underway to raise awareness of the new MoneyGram. And just last week, we launched a referral program. Referral programs have been the primary customer acquisition method for many leading consumer businesses. And we’re looking forward to seeing how this program drives results for MoneyGram. Earlier data after our launch, just a week ago, shows that the referral program is performing well with a high percentage of customers completing a transaction after being referred.
Furthermore, in 2020, we will look to capture more of this high growth mobile P2P markets by expanding to more countries, both with MoneyGram branded capabilities and with account deposit wallet integrations such as the ones we recently enabled in Pakistan, Egypt and Ukraine.
We continue to push our industry-leading innovation in direct-to-consumer. We recently launched MoneyGram FastSend, an entirely unique and industry first service. This service builds on the success of our popular app and makes sending money as easy as sending a text. The service enables the industry’s fastest transaction times and the most seamless money transfer experience, while offering a $10,000 limit per transaction, a considerably higher amount than similar offerings from other companies.
Over the last few years, we’ve invested in our digital business to build a fintech startup, powered by our leading global brand. Our digital business is quickly becoming the go-to cross-border P2P payment solution, and we’re excited that both FastSend and the referral program will further expand our digital capabilities.
In 2020, we will continue to revamp our global walk-in business across several key regions. Recently, we signed a strategic deal with Ebix in India, the largest receive market in the world. Partnering with the largest financial exchange in the country is an important milestone for MoneyGram, and we are excited to enable EbixCash to plug into the MoneyGram platform to access our consumer-centric capabilities and services.
We also recently entered into a strategic partnership with LuLu Money, a leading name in the world of non-banking finance dealing primarily in foreign exchange and global money transfers. LuLu Money will utilize the MoneyGram API driven platform to gain access to our global network. The new agreement will extend the MoneyGram and LuLu presence in the Asia-Pacific region and the Middle East with our service now available through an extensive network of LuLu Money branches. This partnership will revolutionize how the region manages its high volume of remittances by launching unique services into the market and changing the way people approach digital transaction and remittances.
These partnerships are just a start. We have a strong pipeline of new opportunities that we believe can be transformative for us in many markets. And we look forward to updating you on our progress in the weeks and months ahead.
Now I’d like to talk about Ripple a little bit as its such an important highlight of the year, and I think our progress on the Ripple partnership has been instrumental in helping us lead the evolution of digital P2P payments. I couldn’t be more pleased with the partnership and the success we’ve had with Ripple. Today are trading volume continues to grow, and we are partnering to expand the service to more corridors.
I’m also excited to announce that we are working to integrate RippleNet for our account-to-account transfers in 2020. This new integration will further accelerate our progress in accomplishing our vision of real-time global settlement.
And finally before I turn it over to Larry, I just wanted to make a short comment on coronavirus. At this time, we have felt no impact from coronavirus on our business. Our global operations continue unabated and our exposure as an organization to revenue from China is negligible. However, I agree with others that the threat of the continued spread of coronavirus with its toll on human life and its potential impact on global growth warrants close watching and careful consideration as we move ahead.
And with that, I’ll turn the call over to Larry.
Larry Angelilli — Chief Financial Officer
Thanks, Alex. Before I walk through the results, I’ll take a moment to explain the change we’ve made in the accounting presentation for our Ripple activity.
As we’ve discussed in the past, MoneyGram receives a market development fee based on the volume of foreign exchange that we transact on Ripple’s platform. In our third quarter financials, we issued fourth quarter revenue guidance, which included those fees and revenue. Based on recent discussions with the SEC, we have modified our presentation to report these fees as contra-operating expenses as opposed to revenue. Making this change, reduced both fourth quarter revenue and operating expenses by approximately $9 million.
Looking forward, our guidance to revenue will not include Ripple market development fees. Most importantly, this only is a change of presentation and does not reduce the positive financial impact to MoneyGram.
We generated revenue of $324 million in the quarter, demonstrating the continued stability of the business. As Alex mentioned, we returned to global transaction growth in December, led by strong digital and international performance and that momentum has continued into January.
However, when you break down the pieces of our business by geography and product type, our results continue to be somewhat mixed. MoneyGram’s strategy has been to build technologies that can profitably address the US market, as well as diversify our revenue generation, as we build strength outside the United States.
As we announced earlier this year, we’re seeing high double-digit and triple-digit growth in our international online business and that continued into the fourth quarter. Our international walk-in business also continued to strengthen with growth accelerating in Q4. In total, international sends represent the largest piece of our money transfer business and posted revenue growth of 3% and higher transaction volume of 7%. So, now we can see that our priority of diversifying our revenue internationally is paying off.
At the same time however, our US business in general has remained a challenge. In the fourth quarter our US-to-US walk-in business declined in line with industry trends. Our US outbound walk-in business also declined on a year-over-year basis. However on a sequential basis, dollar revenue for both were relatively flat compared to the third quarter.
For 2020, our efforts to return our US up on walk-in channel to growth had the additional headwind of the Walmart2World market place, which was launched last fall. Actually, without that headwind, MoneyGram’s US outbound walk-in business would be on much more solid footing. That being said, so far we’ve been encouraged that customers at Walmart are showing a preference for our powered by our MoneyGram service. They responded well to our pricing and preferred the simplicity of our product over the competition.
In the online space, it’s a different story. We have a great success with changing the trajectory of our US outbound business. In the fourth quarter, US outbound posted accelerating transaction growth at 59% and reported strong revenue growth of 9%. Throughout the year, we’ve made a number of investments to help stabilize the US-to-US online corridor.
We are encouraged by our progress as MoneyGram branded the US-to-US online business reported 11% transaction growth in December. At the end of the quarter, total US-to-US sends, which includes both walk-in and online, represented less than 6% of our total money transfer revenue, with US outbound revenue representing 32%.
As we look at 2020, essentially the trends of the fourth quarter are continuing into the New Year. We’re continuing to see impressive growth in both our digital and international businesses, and we have perhaps the best pipeline of new business that we’ve had in years.
Adjusted EBITDA was $57.6 million for the quarter, down from $60 million a year ago, but up from $51.7 million in the third quarter. Also, fourth quarter adjusted EBITDA was the highest quarter for 2019. Our adjusted EBITDA margin in the fourth quarter was 17.8%, also the strongest of the year. We reached a higher level of contribution from our Ripple partnership, and as our cost structure continued to improve, we’re also reporting the lowest transaction and operating support expense since our restructuring of 2018.
Our comps and bens were higher versus last year in the quarter, as a result of increased restructuring charges and higher accruals on employee incentive compensation. We positioned the Company to be more profitable with less revenue and expected return to top line growth will result in margin expansion in the future. We expect to offset the headwind from Walmart in 2020 and are positioned for growth as our pipeline of new business ramps-up during this year.
Non-commission expenses were $571 million for the year ended 2019 and improvements through cost reductions of 18% year-over-year. We believe we have attained an efficient cost structure for the business, which will continue to decline. For example, reductions in inbound phone calls should continue due to an improved agent and customer experience.
While we’ve been successful in substantially reducing costs and improving efficiencies, some of this was offset by higher interest expense following the refinancing of our capital structure midway through 2019. Interest expense rose to $24.3 million for the fourth quarter, up from $13.8 million for the fourth quarter of 2018. Assuming no change in LIBOR, the fourth quarter represents the new run rate for interest expense on an ongoing basis. Approximately 70% of MoneyGram’s debt is floating, so interest rate sensitivity is lower than before the refi, and any reduction in LIBOR in 2020 would impact about $640 million of the debt outstanding.
As we are disclosing separately this morning, the Department of Justice has agreed to amend the DPA to extend the due-date of the Company’s May 2020 payment to November of 2020. In the meantime, the government has agreed to consider our request to further delay the due date until the end of the term of the DPA, May — which is May 2021, and to reduce the amount to be paid. As these discussions are early, we can only say that an amendment if any would not increase the amount of the forfeiture or impose additional restrictions on the Company. Also, consistent with any discussions such as these, we are not permitted to provide any additional details beyond what we are disclosing publicly.
And finally, as Alex mentioned, there are several major initiatives that will affect our business in 2020. We are yet to see the full impact of the Walmart marketplace, although as we’ve mentioned, additional indications have been better than expected. And we have an extensive pipeline of new business that we believe can offset the impact of Walmart.
We also have new products in the market that starts from zero, which will ramp-up during this year, but the slope of the ramp is yet to be determined. As a result, we’ll be providing quarterly guidance this year. For the first quarter of 2020, we anticipate revenue of approximately $300 million adjusted dollars [Phonetic] with adjusted EBITDA of approximately $50 million, both on a constant currency basis.
And now, I’ll turn the call back to Alex.
W. Alexander Holmes — Chairman and Chief Executive Officer
Thanks Larry. In summary, in 2020 we will continue to focus on customer acquisition and retention, digital expansion and implementing market specific strategies. While the US market will continue to pose challenges, we expect our strong pipeline of new partnerships combined with both digital and international growth to help offset that impact. Overall, we are focused on executing our strategy which will enable us to return to growth and deliver strong financial performance in the years to come.
And with that, I’ll now turn the call over to the operator and we’ll take your questions.
Questions and Answers:
Operator
Thank you. [Operator Instructions] We’ll now take our first question from Ramsey El-Assal from Barclays. Please go ahead. Your line is open.
Ben Budish — Barclays — Analyst
Hey guys. This is been Ben Budish on for Ramsey. I wanted to first ask about the guidance for the year, and Larry I know you mentioned that you’re guiding quarterly this year, but I wonder if there’s any color you can kind of give us on maybe quarterly cadence? You know in the past you’ve been speaking about kind of growth and stabilization sequentially, and I’m wondering, should we expect to maybe see some more of that? Or the quarterly proportion of revenue for this year going to look something like 2019? Any color there — you could give there would be helpful for modeling perspective.
Larry Angelilli — Chief Financial Officer
I think it’s a combination of things. First of all, traditionally the first quarter tends to be the low quarter of the year, seasonality wise, and then the other aspect of this is that the pipeline of new business that we have is in start-up mode. So it’s tough for us to quantify longer guidance because of that dynamic. You have a combination of seasonality and a ramp-up of new business. So, it’s really — it’s I think indicative of some upside potential of something that’s just almost impossible to quantify at this point.
W. Alexander Holmes — Chairman and Chief Executive Officer
Yeah, I mean the wild card, right is really the Walmart scenario.
Larry Angelilli — Chief Financial Officer
And then there’s that, which is how severe the headwind is versus what we’ve experienced so far.
W. Alexander Holmes — Chairman and Chief Executive Officer
Yeah, and I think — we’re expecting, I think kind of a big impact, right, on kind of the worst and we’ll hopefully be able to offset that as Larry said or outperform that as we’ve done so far, at least in the fourth quarter and in the early part of this year we are trending ahead of, I think, where we thought we’d be on that. But clearly, a lot of that is going to be consumer-driven choice at the point-of-sale. We are doing our best to position our product, in the best life for customers and so far that’s working. But, time will tell. So, I definitely think we’re being conservative on that and expecting an impact there, and then we’ll see how that plays out.
Ben Budish — Barclays — Analyst
Okay, that makes sense. And then if I could ask, on the cost side, it seems like you guys have done a good job taking a lot of costs out of the business. And you guys made a comment about how going forward you might need to see some top line growth before we see margin expansion. So I guess, I’m just wondering, if there — are there more costs to be taken out? Or given the level of investment you’re putting into new initiatives, do we need to see more top line growth before we get some kind of more natural operating leverage? That would be helpful here.
W. Alexander Holmes — Chairman and Chief Executive Officer
We think that those costs can come out, but it’s not from restructuring. I think that — and I think what we’re trying to illustrate is that with the customer experience that’s improving, you just have less friction, you have less cost and we think we can continue to be more efficient as the product improves and the cost of that product is reduced. So those are all follow-ons from what we’ve already achieved. So we do think there’s potential for further cost reductions, but not in the context of some restructuring or something of that order.
Larry Angelilli — Chief Financial Officer
Yeah, I think it’s also important to just highlight again that the accounting treatment on the Ripple transactions will be recorded as a contra expense, right.
W. Alexander Holmes — Chairman and Chief Executive Officer
Yeah.
Larry Angelilli — Chief Financial Officer
So that’s going to have the impact of pushing margin, kind of, I guess on a quarterly basis, right as that ramps as well. So you will see that and there I wouldn’t turn that into the category of cost savings, but definitely from an accounting perspective, the contra expense will definitely push the expenses down.
Ben Budish — Barclays — Analyst
Okay, thanks so much for taking my questions.
Larry Angelilli — Chief Financial Officer
Thank you.
Operator
We’ll now take our next question from David Scharf from JMP Securities. Please go ahead. Your line is open.
David Scharf — JMP Securities — Analyst
Hi, yeah, good morning. Thanks for taking my questions. Hey, actually I wanted to follow up on the margin discussion and specifically, can you give us a little sense for maybe how we should view the geographic mix impacting the profile? I mean, I’m — I seem to recall that transactions initiated outside the US that are classified as international tend to be kind of the lowest margin versus US-to-US and US outbound. Should we be assuming any kind of downward pressure based on mix shift? Or at this point, it’s 62% of revenue, is it getting towards a level where you think it’s probably peaking?
W. Alexander Holmes — Chairman and Chief Executive Officer
No, no, I think it’s a good question. I’ll start and then Larry can jump in. It’s definitely a good question and that’s something that obviously, goes into any consideration on operating the global business, because if you look across various regions, obviously, Africa from a send perspective has a good example. There are typically high RPT’s and high margin corridors, I think you can probably contrast that, quite considerably with growth in the Middle East, where you see a lot lower RPT and a lot less on a margin basis on a per transaction view. And I think, the rest of the Asia Pacific market, I think tends to vary a bit and then obviously you have, kind of Latin America impact, which is a bit of a mixed bag as well depending on which countries your actually operating in.
So, when you look at it holistically, I think you know what we’re trying to do is run that portfolio of business and obviously sometimes you don’t have complete control over what’s happening in different markets as different things are shifting, maybe from a geopolitical perspective, maybe from an economic challenger or currency challenge and so sometimes you’re going to get a different mix on any given month or any given quarter.
I think that being said, from a marginal perspective, we are definitely looking at this from an incremental transaction, incremental customer perspective. And the more volume we can drive with the low cost structure that we have and the scale that we put through, we think it’s really a scale game at this point and it’s about volume, and it’s not so much a concern about an individual per transactional basis.
So, I think we’re going to continue to see — being mixed and kind of how RPT’s are coming in from various corridors, but that’s going to flow into the P&L in a very different way, right. So, I think at the end of the day, margin should be relatively neutral based on corridor mix, but I think it’s the net of how we can do from a scale perspective that’s going to make the difference. You want to add to that?
Larry Angelilli — Chief Financial Officer
Yeah, I was just going to say that our marginal cost per transaction is extremely low. So, anything we add and the thing that we’ve been seeing for the last couple of years is it with our revenues declining, we’ve actually been losing scale. So, getting scale back actually automatically puts a lot of support behind our margins and we’re kind of positioning the Company that way.
David Scharf — JMP Securities — Analyst
Right. In listening I realized at this point and for a number of reasons you highlighted, the guidance is going to be limited to quarterly during this year, and I guess the bigger question on the margin front and I’m not even asking you to put a timeline on it. If I look at kind of pre 2016-ish, the Company had achieved an adjusted EBITDA profile as high as kind of 18% to 20% margins. And in your — I mean, is that internally sort of a level you’d like to get back to? And I’m sort of wondering along the lines of scale, what type of, sort of sustainable revenue growth do you think you need to be able to achieve consistently to get back to that kind of high teens 20% margin level, if that’s an achievable goal?
W. Alexander Holmes — Chairman and Chief Executive Officer
I mean, I guess without committing to some sort of guidance, I would just say that those ranges are achievable, but I would also say that some of our new products have lower cost that takes more transactions to generate revenue. I mean it’s but yeah, I think it’s achievable, but I don’t think we can put a timeline on it, David.
David Scharf — JMP Securities — Analyst
Yeah, no, that’s fine. Hey, just one other question, just kind of shifting gears. Alex, it was pretty interesting how you were remarking that a lot of your kind of digital direct-to-consumer transactions, you’re reaching a different demographic. I mean, I think you characterized it as younger and they are transacting more frequently. I’m wondering, do you have any sense for, well, you probably do now, are you reaching more banked consumers versus unbanked than in the past? Is that mix changing at all? And does that have any implications about stickiness and competitive risks and so forth or factors?
W. Alexander Holmes — Chairman and Chief Executive Officer
Yeah, good. I think at the end of the day, these customers are increasingly more banks and I think that that’s a pretty definitive trend I think in Western Europe and in the US, across the Middle East as well and even into parts of Asia. I think that the increase in mobile activity and online is definitely pushing and expanding the reach of bank account registration or the use at least of debit cards in particular and to a lesser degree, I think wallets, but definitely direct-to-account integrations and those types of sends, and I do think that you do see an increase in stickiness from those types of service.
I think Visa Direct is a good example of that where, when a consumer registers on our website, downloads the app, registers for card-based send and then begins to send to someone else’s debit cards, that process is pretty seamless. We’ve seen that in the FastSend world as well. And so that ability to kind of re-transact and create, I would say, more frequent, at a little bit lower dollars per transaction, but certainly more frequent transactions is definitely tied to that demographic shift, but I think also its tied to that shift in banking as well. But, it’s really interesting and I think it’s super important to focus and remain aware of just that different segmentation of consumers, because I don’t believe that the online space is really detracting or pulling consumers out of the walk-in space. I think it’s just a different consumer demographic, I think it varies by market. But I do think that that online space, particularly when you think about younger consumers is growing faster and that’s definitely where the future is going at least in my mind, so I have no belief at all that the walk-in business is going away and in some markets the walk-in business is continuing to accelerate and I think has a huge runway in front of it. But there is definitely a shift and I think that that shift is you know very prevalent anywhere where mobile and online applications continue to become easier and more mainstream for our customer demographic.
David Scharf — JMP Securities — Analyst
Okay, got it. Just so I understand your definitions, when you say 22% of trends are digital, is a digital transaction just defined on the send side? I mean are most of these going to another banked consumer or is it mostly something that’s initiated mobily that is still being picked up at an agent location?
W. Alexander Holmes — Chairman and Chief Executive Officer
Yeah, no, our definition incorporates both send — it could be either a send or a receive that’s digital. So we’re trying to get perspectives on both, because we do see a lot of activity in many markets where you’re seeing cash spends that are then put into an account deposit on the receive side. We also see a tremendous number of online transactions from a send perspective that are then picked up in cash. And then there is obviously a subset in fast growing markets, which is basically what you call account-to-account, which is you know online sends going into — directly into a bank account or a wallet.
So we do eliminate on our accounting, so we’re not double counting. We do have an elimination formula there, so I’m not giving you kind of a double count on a send and receive. So if it’s both, we count that as one, but if it’s cash-to-account or account-to-cash, either one of those would count as a digital transition at least on part of it.
David Scharf — JMP Securities — Analyst
Got it. Great. Thank you very much.
W. Alexander Holmes — Chairman and Chief Executive Officer
Sure, thank you.
Operator
We’ll now take our next question from Mike Grondahl from Northland Securities. Please go ahead. Your line is open.
Mike Grondahl — Northland Securities — Analyst
Yeah, thanks and good morning guys. Ripple, a nice increase from $2.4 million in 3Q to $8.9 million in 4Q. Can you give us a little bit of sense, have you expanded past the Mexico quarter, or maybe what type of penetration you’re seeing in Mexico and how do we think about Ripple and how it can help you in the next year?
W. Alexander Holmes — Chairman and Chief Executive Officer
Yeah. We are trading more Mexican peso than we had been, but we’re also adding other currency payers and we continue to add new currency payers through the course of this year. And so I think the volume, well we have every expectation the volume will continue to increase and then the fees are proportional to the amount of volume.
I would say that, an increase on the order of magnitude of what we saw from Q3 to Q4, that is not — that’s not going to persist. I would say that it’s going to continue from where we are, but probably flatten out a little bit at a higher level than where it is today. It’s not – it’s not like an arithmetic progression or something. It’s a — but it is going to be a function of the success with adding these new payers, but I think it will trend similar to higher than what you saw in the fourth quarter.
Mike Grondahl — Northland Securities — Analyst
Got it, and are you adding a couple corridors, a dozen or so corridors. How do we think through that?
W. Alexander Holmes — Chairman and Chief Executive Officer
We do it kind of one at a time, it really — what we are doing is we’re creating markets almost from scratch and so they start out really small. So we — as an example, we are doing Aussie dollars now, we are doing Philippino Peso now. We can cross some of those, and so those markets have to evolve and develop especially — we are getting paid for.
So they start out really small and then as those markets come deeper and more liquid, then we put more volume through them. And then as we get those stabilized and we start new ones and we sort of have a look at the world with Ripple and then, but it’s usually crawl, walk, run. I think we try to get stable and growing in a quarter before we start spreading the resources around a new thing. So, it’s pretty deliberate, and it will be a function of the early success of the corridor and then we go on to the next one. But, each one behaves a little…
Mike Grondahl — Northland Securities — Analyst
Could you just talk then a little bit about RippleNet for account-to-account transfers? Just kind of what you mean by that, how that works and does that affect 2020?
W. Alexander Holmes — Chairman and Chief Executive Officer
Yeah, I think that RippleNet is kind of the next evolution or potentially the next evolution of payment flows from an account-to-account perspective, and so it gives a different rail for money to move and it gives some uniqueness to that flow as well.
So it’s really a different, for lack of a better term, it’s really a different call and it’s basically enabling us to partner with banks and others that are participating in RippleNet in a very different way than I would say that you have to do from a direct-to-account integration or some of the other one-off discussions that you have from an account-to-account perspective.
I think what’s also interesting about pushing volume through RippleNet is that not only do you get a lot of economies of scale partnering with others that are already connected to it, but we can also then begin at some point to bring in an overlay, kind of the ODL capability which again is the on demand liquidity and that’s kind of the goal, right, which is push every account flow with the money flow and begin to pair-up those transactions.
And so I think as we said before, that’s a little bit of the vision, that’s a little bit of the pie in the sky piece, because right now that is — that has to come together, but I think if we can do that, we would be the first to accomplish that and it would be, I think fairly revolutionary for cross-border money flows.
Mike Grondahl — Northland Securities — Analyst
Got it. Okay, thanks guys.
Operator
We’ll now take our next question from Kartik Mehta from Northcoast Research. Please go ahead. Your line is open.
Kartik Mehta — Northcoast Research — Analyst
Hey, good morning Alex and Larry. Alex, I wanted to ask a little about maybe what’s happening in terms of pricing. I know you said, I think international now is 62% of total money transfer revenue and you saw 7% transaction growth and 3% revenue growth. So I was wondering, are there markets you’re specifically seeing pricing pressure or is that something that maybe you did to help grow the transactions?
W. Alexander Holmes — Chairman and Chief Executive Officer
Yeah, I know — I don’t think in the international markets, there really isn’t what I would say pressure on us to do anything. What we’ve done has been very proactive in the past year to adjust prices in as many markets as we can to be more competitive, and I think that we have definitely found some, not surprisingly I suppose, that market competitive and lower prices to some degree to get more customers and begin to turn the business around.
So we are also — you also have to lay over a mix shift as well, we are seeing quite a bit of resurgence in growth out of the Middle East and a lot of Asia Pacific as well beginning to come back into the fold, and so we are getting increases in volume from some low RPT corridors. So, there is some mix there, but when you look at it holistically, I don’t think that there’s a reactionary part of the strategy around pricing at this point. It’s been much proactive to put us on the offensive and begin to shift the dynamic in the market around customer acquisition and retention as well.
So it’s really, those two pieces or those three things rather coming together, and I think we feel very good about that position. I think we were — we talked about this, I can’t remember if it was the last call or the call before, but we talked about you’ve got to get the product restructured and fixed and presented to the customer in a way that’s attractive to them. That will drive customer acquisition and then further retention that drives transaction growth and the revenue follows on. So I think the formula is working and coming together and we’ve got nice momentum in a significant number of markets, both in the walk-in space and in the online digital space, so we’re very happy with where that’s headed, and what that can mean for us going forward.
Kartik Mehta — Northcoast Research — Analyst
And then I think Alex you talked about your online transactions, obviously, maybe revenue per transaction lower than your traditional transactions, but those customers are engaging more. Is there a way to compare your online customer versus your traditional customer and on an apples-to-apples basis, what it might mean for revenue per transaction and ultimately margins?
W. Alexander Holmes — Chairman and Chief Executive Officer
Yeah, no, I think that that’s a good question. There’s a lot to that answer, but I would say it in a simplest format, and again it’s going to depend on the market, but a lot of our online sends are out of Europe and the US and then obviously a few markets across Asia and Australia, Canada etc. At this point, I think what we’re seeing is, I don’t want to quite say it’s about half, but its maybe somewhere between a half and two-thirds, I guess, I’m still an American using the old standard system here, but metrically it’s probably easier, but maybe, there’s probably a difference in the pricing of upwards of 50% in certain corridors and certain markets in the online space. But marginally the delta isn’t nearly that high.
So, what we’re actually seeing is pricing in the walk-in space to a large degree sort of maintaining where it’s been, with a mix shift occurring based on where the sends are coming from, but what we’re seeing in the online space is an acquisition of customers at a lower RPT per transaction, but then we are seeing a significant increase, maybe 20%, 25% or so, in some cases a little higher than that in terms of number of transactions, although those customers are putting through in any period of time.
So the net of that is that we’re seeing nice returns in the online space and marginally we’ve done a lot to improve the online performance and the funding mechanisms, and a lot of the risk management and some of those costs. So, from a margin perspective, I think that’s tightening quite a bit as well.
Kartik Mehta — Northcoast Research — Analyst
Perfect. Thanks Alex, appreciate it.
W. Alexander Holmes — Chairman and Chief Executive Officer
Thank you.
Operator
We’ll now take our next question from Bob Napoli from William Blair. Please go ahead. Your line is open.
Bob Napoli — William Blair — Analyst
Thank you. Good morning. Just on Ripple, what is the net economic effect of that revenue stream or the contract expense steam?
W. Alexander Holmes — Chairman and Chief Executive Officer
Thank you. It doesn’t have a cost structure associated with it, so it will generally fall through. If that’s what you’re asking.
Bob Napoli — William Blair — Analyst
Yeah, so that was a benefit to the bottom line of $9 million in the quarter.
W. Alexander Holmes — Chairman and Chief Executive Officer
Yes, that’s true, yes.
Bob Napoli — William Blair — Analyst
Okay. I mean that’s pretty significant. I guess is that sustainable? I know you talk about it growing, but is that margin, sort of being — what cost is it replacing? Why — what is — why is that such an attractive contra expense stream, if you would?
W. Alexander Holmes — Chairman and Chief Executive Officer
It doesn’t really replace the cost, what it is, is we are getting a fee for a service that we’re providing in building these new markets. And so, the fact that it’s a contra expense, to be honest we’re still scratching our heads about it too. But it’s — so, really almost think of it as a separate revenue stream or contra expense stream. It doesn’t really replace the cost, and then we’ve extended the contract. So it does have a longer life to it and we can kind of harvest that stream over the next couple of years.
Bob Napoli — William Blair — Analyst
How long is that contract in place?
W. Alexander Holmes — Chairman and Chief Executive Officer
We extended it to 2023.
Larry Angelilli — Chief Financial Officer
Yes.
Bob Napoli — William Blair — Analyst
Okay. Okay, thank you. Brink’s talked about partnership with MoneyGram on their earnings call, but you guys didn’t mention Brink’s at all. So I’m a little confused, as that — if that was material enough for them to bring it up? And how are you working with Brink’s? Are you working with Brink’s? And what they can add to MoneyGram?
W. Alexander Holmes — Chairman and Chief Executive Officer
Yeah, no listen, Brink’s is down the road from us, which is great and I think the interaction and the dialog there has been very positive. We are currently in, I would say the early stages of working on longer term arrangement to try to marry-up the — I would say the provisions of both companies that are best suited for a partnership perspective, and when I guess, I mean by that is, they are one of the leaders in cash-to-cash money transfers and they are definitely a leader in actually moving physical cash.
And so, the needs of business partners in a significant number of markets around the world and particularly here and in the US as well pair-off pretty well, right. Cash handling, cash management, getting cash deposited can be very expensive and time consuming and its a burden on our partners and it’s a burden on our partners not just for our business partnership, but also on their daily lives and activities and Brink’s is working to push a number of, I would say forward thinking and leading products into the market that we think would be interesting for us to partner up on. So, we’re doing some pilots, we’re in some early-stage roll-out of those and having discussions on further capabilities on what we can do there. So, I — we didn’t have a significant update. I thought they did a nice job of talking about it on their call and we didn’t intentionally leave it out, just didn’t really have any update.
Larry Angelilli — Chief Financial Officer
Yeah, and one other thing Bob is that they bought their MoneyGram stock in the open market. So it didn’t have any financial impact on the Company.
W. Alexander Holmes — Chairman and Chief Executive Officer
Right.
Larry Angelilli — Chief Financial Officer
So, it’s really negotiations that we are — like an agreement as we would with agents, but it really didn’t have any financial impact on the Company.
Bob Napoli — William Blair — Analyst
Okay. Then Visa Direct, how much are you using Visa Direct? How are you using it today? And is it going to become a bigger factor in your business?
W. Alexander Holmes — Chairman and Chief Executive Officer
Yeah, no Visa Direct has been — well, Visa in general has been a great partner. Visa Direct the service itself has been I think, unique and instrumental in pushing a complete overhaul of our domestic online business. I mean we were able to launch last year the ability to send money from account-to-account in the United States and that’s getting a lot of interest and a lot of scale. Consumers were able to download our app and basically push money to debit cards across the country in a pretty fast, easy way. So, we definitely have a product out there now that is not only comparable to Venmo, but I think a little bit better in a number of ways, a little more transparent and I think also we charge money for it, which is I think a huge win from a corporate perspective. We’ve also then taken that product and evolved it and launched our FastSend product. So rather than me needing to know your information to send you money for Visa Direct purposes, we now use the FastSend product, so I can send a text message to you and then you will basically click on the links and complete the acceptance of the funds, and pull those down into your account using your debit card. And so it’s actually a very slick and, I think, highly unique product in the market right now.
That is going to be pushed across border. We launched that service to Spain, which may seem like a bit of a unique service but, or anyway it does to me. But Spain has a very high Visa penetration and it’s an interesting market to begin to pilot and push that into, and so we have a significant pipeline of countries to expend Visa Direct to and quickly with the FastSend services as well.
And anywhere that we are online today, which is north of 30 countries, it’s a pretty fast and easy transaction for consumers, particularly when they are using the app. So, it is definitely pushing us critically into the P2P space. It’s a significant savings over traditional commission that you would otherwise pay on a money transfer, and so we’re able to do that at a relatively low fee to the consumer and there is nice FX margin on those transactions.
So, it is I think an awesome service, but it’s not — it’s not the only service that we’ll be using. We do a lot of direct-to-account integrations. We are doing things with Ripple, other wallets and other partners around the world. So, it will become a growing piece of our business, but it will not be the only piece of the business.
Bob Napoli — William Blair — Analyst
And just last question. The Walmart market place, did that — when did that change in the last fall, and do you have — what is the revenue you’re getting from Walmart? What has it changed to? Is it, I mean, has it stabilized? Are you confident that it’s — that that relationship has stabilized?
W. Alexander Holmes — Chairman and Chief Executive Officer
Well, the relationship has never been in question, and maybe that’s not…
Bob Napoli — William Blair — Analyst
No, I mean the revenue you get from the relationship, I guess.
W. Alexander Holmes — Chairman and Chief Executive Officer
Yeah, yeah, yeah exactly. The relationship is great and we do a lot of — yeah, yeah, yeah, we do a lot of good things with Walmart.
The product started and stopped and stated and stopped throughout the fall. And then began to scale, I think probably in earnest from a roll-out perspective in the December, January timeframe. The — I’d say the single biggest change associated with the roll-out of a competing service from an outbound perspective, really is the experience at the point-of-sale on the screens and kind of the flows that the associates behind the counter see and then obviously what the customer interacts with. And I think that’s what Larry was highlighting, which is the way our product is displayed, I think is a little simpler and more straight forward. We run a will-call system. So if you send to Mexico, you send to Mexico, all agents are available. If you use the competing product, in many cases you have to select the agent that you’re going to, which can be different and a little, I would say not as simple, particularly when you’re in a Walmart with a lot of people and looking for speed and time and service. That being said, the competing product did come in with some significant discounts on FX in a number of places, otherwise the fees are basically priced the same. So, we have had to make some changes to FX in a number of corridors to try to be as competitive as possible. That’s bad news for business and for margin from a corporate perspective. It’s good news for customers, because they are getting a lower price in the market, but those adjustments that we made have largely enabled us to maintain our customer base and kind of offset any erosion that we would have otherwise expected.
So it’s a little bit of a balancing game, because obviously if you change prices enough, you may as well lose all your customers, and if you retain all the customers, it’s a good thing, but obviously, if you have to cut prices enough, you could have the same financial impact.
So, right now we’re trending ahead of where we thought we could be. As I said earlier, we are anticipating and have sort of factored into 2020 outlook that the impact could be significant. I think we indicated last year that Walmart2World represents about 9% of revenues or so.
I think that there’s been a lot of market bravado that we might lose half of that business. So, if you factor that in, and hopefully we’ll come in well ahead of that, but time will tell. And I think that probably is for us the largest headwinds as we go into 2020 and it’s also probably the largest unknown, because it’s something that we can competitively continue to position, but we don’t have complete control of how the product is displayed.
So, we are doing the best of it. I think right now, we’ve done a very nice job it. As I said, we’re excited about our partnership with Walmart. We are in discussions with them on a number of things at any given moment in time, and we’ll keep competing to win there. So, we are happy to update you at the end of this quarter on performance there and revise kind of our outlook accordingly.
Bob Napoli — William Blair — Analyst
Thank you.
Operator
We’ll now take our last question from Tien-Tsin Huang from J.P.Morgan. Please go ahead. Your line is open.
Tien-Tsin Huang — J.P.Morgan — Analyst
Hey, thanks for taking my questions. I know you got a lot of questions on Ripple, but just generally speaking, you’ve had a lot of announcements on the, I feel like on the digital front, on the product front in the last several months. So I think you mentioned 22% of business is next-gen or digital. Is there a way to think about sort of the backlog or the pipeline or the outlook for your digital business broadly? Or what should you, or what should we focus on or prioritize with some of these non-Ripple announcements, so to say, because I know you got a lot of questions on that. What could really move the needle here, if that question makes sense.
W. Alexander Holmes — Chairman and Chief Executive Officer
Yeah, that’s a great question. I think we can continue to make sense from a — to check in on and we’re thinking about how to maybe present this a little differently going forward. There’s a couple different buckets to look at from a digital perspective. Obviously, there are consumer-direct websites like specifically MoneyGram Online, where we are looking to push and scale that into as many markets as possible. Today that’s just over 30, we have several left from a licensing perspective, where it’s not easy, but relatively easy to turn on to get those businesses up and running. So we’ll continue to scale that. But the countries that we turned on really have all been in the last 18 months or so. And scale on those, it’s just not been reached yet. They just continue to grow like crazy, and we probably have four or five, six of them that are really pumping out a significant amount of volume. And then a number of them are just a lot smaller, but the growth rates are phenomenal and every day we’re just seeing more and more customers come through. So a lot of its going to be around how do we market that, promote it, advertise it and push those services. So I think there’s a huge opportunity to scale and grow those consumer direct websites.
The secondary aspect of the digital pieces is, then how many partnerships can we have in markets where we don’t have a license, where we can partner with someone else to really push online volume and so we have a number of countries where we currently have partnerships today, where they have the website, they maintain all the customer registration, all the banking integrations, but they are using the MoneyGram rails to send money around the world. And so we have a number of those that we’ve launched in a significant pipeline. And then I think on the receive side, account deposit is becoming more important, particularly for us, and I think account deposit can be reached in a number of ways, either direct tie-ups into banks or through wallets or through aggregators or through things like Visa Direct. And so scaling all of those as well is critically important, and obviously if you’re doing an online transaction to an account or digital wallet, obviously the cost on that transaction is significantly lower than a traditional walk-in money transfer. So the ability to sort of scale that and drive incremental growth and margin from it is huge. But, when you, if you pause on sort of those three ideas, and then you back up and say, the world is moving to digital, the world is becoming more mobile, the world is becoming much more interactive, it’s really about the overlay of the services associated with that, that is going to be I think the most compelling. And that means really, really presenting our cash and what we’re calling our walk-in business now in a more dynamic way, because I think there’s a tremendous value add to consumers being able to put money into the system and extract money from the system, in all the markets around the world. And so we’re really looking at that, not necessarily as the default form of transfer, but we are looking at it as a value add to that online platform and the digitization of what we’re doing.
We’ve talked a lot about digitizing the customer experience to the point of sale, and we’re really trying to do a lot with notifications, interaction with customers, so that they feel like the transaction is more seamless and whether their tendering for a transaction in cash or completing the transaction from a bank account or online or through a debit card, we want them to feel very seamless and unique customer experience. So, I think you’re going to see us present the business differently and continue to evolve that. I think that the percentage of business that’s going to be digital is obviously going to be a little bit of a factor of how fast we can grow that, but then also what happens with the walk-in business.
So, you may see some variations in the percentages, but I think generally speaking the size of the digital business will continue to grow and ramp and scale, but I also think the walk-in business has potential to keep pace and also accelerate in that significant number of markets as we move into the year. So, we’ve got a lot in the pipeline, a lot on the table for really the next six months to build and deploy and develop and then I think there’s some huge opportunities to ramp and sale that, in probably the second half of the year.
So, when you drop back and look at it, I really think that this idea around concepts like FastSend, how do we get notifications and really seamlessly connect senders and receivers. How do we build a better service and one that’s stickier and dynamic and interesting and really lead cross-border P2P, because I think that’s what’s missing from the market right now. I think that is too choppy, and the services out there are really not compelling from a consumer perspective and I think what you’re seeing in domestic markets are real unique and seamless interactions on the ability to send P2P. When you get into cross-border, it gets clunky and chunky and we are really trying to simplify that and streamline it and make it as unique as possible.
So, I think that’s what I’m most excited about and supplementing that with a walk-in business that’s more robust, more dynamic and growing, I think is going to be a great formula for success. So, we’re working really hard to pull all of that together and put it into market, but so far I think we’re exceeding our own expectations in terms of delivery on that. So, hopefully we’ll see that scale soon.
Tien-Tsin Huang — J.P.Morgan — Analyst
Yeah, that’s a useful preview. I know we are little bit over the hour mark, but I did want to ask just given all these things you’re working on, beyond the presentation of it, do you feel like you have the freedom to invest what you need to investor to really get this thing going? So, I guess the bigger, broader question on margin there, but do you feel like you have the freedom to — what you need to do on spending?
W. Alexander Holmes — Chairman and Chief Executive Officer
Yeah, no, I’ve actually — I’m super thankful that we have the team here that we have. We have worked extremely hard the last couple of years to reduce costs, but to drive cost savings from efficiencies and just doing things in a more dynamic way, more seamless, in a more functional way and really getting more with less, and so we’ve pushed the teams to stretch and to make different decisions. But it’s also forced us to innovate and think very differently and I don’t feel like we’re struggling against that. Obviously, it’s always better to have more freedom and more ability to make those decisions, but there’s always constraints no matter what you are doing and so we work within those constraints. And I think we forced ourselves to think differently, and really sort of reinvent the business and reinvent ourselves. And so that is definitely noticeable, internally. I think it’s becoming much more noticeable externally, and the results will follow. So no, I don’t feel like we are in any sort of position that’s challenging from that perspective.
Tien-Tsin Huang — J.P.Morgan — Analyst
Okay, great. I look forward to the next update. Thanks.
W. Alexander Holmes — Chairman and Chief Executive Officer
Alright, thanks too.
Stephen Reiff — Head of Corporate Communications
Alright, well, I think we are over the hour, and if we have [Phonetic] a question, so I’ll turn it back to you [Indecipherable].
Operator
It appears there are no further questions at this time. I would like to turn the conference back to you for any additional or closing remarks.
W. Alexander Holmes — Chairman and Chief Executive Officer
Well, thanks all for your time. We’ll talk to you all later.
Operator
[Operator Closing Remarks]