(Reuters) - Western Union Co (WU.N), the world’s largest money-transfer company, reported a better-than-expected quarterly profit as lower prices drew more customers, particularly to its digital money transfer business.
Revenue at the company’s digital business, which includes westernunion.com and mobile money transfer, jumped 21 percent in the third quarter, accounting for nearly 6 percent of total revenue.
Western Union has cut prices and invested heavily in its online and mobile businesses to better compete with fast-growing rivals such as MoneyGram International Inc (MGI.O), Xoom Corp XOOM.O and privately owned Boom Financial Inc.
The move is starting to pay off as the company has been eating into the market share of online rivals such as Xoom, by offering highly competitive foreign exchange rates and lower transaction fees.
The company said on Thursday it plans to increase its spending on digital and mobile business, compliance and cyber security in the fourth quarter.
“Our previous pricing and other strategic actions in Europe and in Russia have helped drive good results,” Chief Executive Hikmet Ersek said on a post-earnings conference call.
Growth in transactions in Europe and Russia, which account for more than a fifth of Western Union’s total revenue, rose 10 percent during the quarter.
“We believe market has shown fairly stable pricing recently,” Chief Financial Officer Raj Agrawal said, adding that the company expects pricing actions to be modest for the remainder of the year.
Western union’s third-quarter transaction volumes rose 5 percent. Remittances increased about 5 percent to $22.1 billion.
Revenue from the company’s consumer-to-consumer business rose 2 percent to $1.15 billion.
Western Union forecast full-year earnings of $1.50 per share, the top end of its previous projection of $1.45-$1.50 per share.
Net income for the quarter ended Sept. 30 rose 9 percent to $234.1 million, or 44 cents per share.
Analysts on average had expected earnings of 38 cents per share on revenue of $1.43 billion, according to Thomson Reuters I/B/E/S.
Money transfer companies such as Western Union and MoneyGram International Inc (MGI.O) have been forced to spend more to meet stricter compliance requirements to prevent money laundering through their payment systems.
Western Union said it expects compliance costs to be about 3.5 percent of full-year revenue.
Ersek said compliance, retail agent commissions and certain other costs had risen but the company was managing “discretionary expenses very tightly.”
Western Union was probed by the Federal Trade Commission and a U.S. district court over fraud-induced money transfers in February.
Englewood, Colorado-based Western Union’s shares were up about 3 percent at $17.15 after the bell on Thursday.
Editing by Saumyadeb Chakrabarty