The COVID-19 pandemic has literally made paper money a dirty word, making consumers choose electronic forms of payment, rather than handling bills. In fact, a 2002 report in the Southern Medical Journal showed pathogens, including staphylococcus, were found on 94% of dollar bills tested. This report presaged digital payments that would be offered by Western Union and MoneyGram.

But the rush to digital payments may be too quick for Western Union and MoneyGram to keep up as separate companies. Rumors say that Western Union is attempting to acquire MoneyGram.

A merger would combine the market’s two largest legacy money transfer companies. Observers say that both company’s models have been under pressure for some time due to the emergence of FinTech’s that leverage blockchain and other emerging digital models to offer P2P options for transfers, remittances, and international payments.

While there’s no guaranty of a deal, the companies have reported sizable revenue; however, they experienced some softness immediately prior to the coronavirus pandemic.

Western Union boasts more than 500,000 agent locations in 200 countries, and MoneyGram has 350,000 global locations. Their network of agents are a legacy of both firms’ pasts as traditional places to retrieve wired money—first sent by telegram in the early 19th century.

“Western Union will have the opportunity to consolidate the MoneyGram volume to its platform and jettison duplicitous brick and mortar locations,” said Sarah Grotta, director of the debit and alternative products advisory service at Mercator in an interview with Bloomberg. She went on to say that Western Union would get some digital assets from MoneyGram to add to its own technology. “This is about achieving volume at scale that will drive efficiencies to better compete with fintechs like TransferWise.”

Both Companies Looking to Expand Their Digital Footprints

Western Union and MoneyGram are both aware of the skyrocketing expansion of the use of fintech, and they’ve made efforts to incorporate modern payments into their business models. Late last year, Western Union teamed with Amazon to provide long-term cloud services.

Western Union the Amazon partnership lets it expand its digital footprint, providing agility for its online transformation. The move allows Amazon customers who want or need to pay with cash to make a purchase online then visit a Western Union location to pay for it with dollars. When Amazon shoppers click to check out, they receive a code and a number. They then 24 hours to visit a local Western Union to use the code and pay cash for their purchase.

“Customers have told us they love the convenience of paying in cash,” Ben Volk, Amazon’s director of payments said in a statement. “Together with Western Union, we’re … enabling them to pay for their online purchases in a way that is convenient for them.”

In addition, Western Union has partnered with Visa to speed payment processing for mobile transactions. It’s also set up blockchain initiatives to expand its reach in emerging markets. The investment is allows MoneyGram access to Ripple, a company that has enabled cross-border payments with banks and FinTech’s. These firms use Ripple’s ledger to reduce time and costs from payments by eliminating third parties like correspondent banks.

These actions have already helped Western Union partly offset political unrest in Lebanon and South America.

Likewise, MoneyGram has attracted interest from China’s Ant Financial in 2017. This was via a proposed merger was stopped because of political pressure during the U.S.-China trade dispute. MoneyGram started its digital transformation roughly three years ago with the objective of becoming more customer-centric.

“Our products were designed primarily for the distribution aspect of our business — Walmart, Canada Post and other agents — rather than the consumers who came in to pay for transfers,” Kamila Chytil, MoneyGram’s chief operating officer, told PaymentsSource in an interview.

These moves towards automation are aimed at transferring more business to digital channels and decreasing the reliance on agent locations.

Western Union and MoneyGram Revenues Are Down

Western Union’s revenue for Q1 of 2020 was $1.2 billion, which is an 11% drop from 2019, according to Macrotrends. The decline was likely because of the COVID-19 pandemic, and like most firms, Western Union has scuttled its outlook for 2020.

In 2019, Western Union’s revenue was $5.29 billion, which was a 5.33% decline from 2018. In 2018, the company’s revenue was $5.6 billion—a 1.2% increase from 2017.

In 2019, MoneyGram reported full-year revenue of $1.2 billion, a decline of 11% from 2018. MoneyGram also saw an accelerated decline in walk-in business as the pandemic expanded. From the middle to the end of March, MoneyGram reported a 57% increase in digital volume, as its walk-in volume fell 29%.

In April, MoneyGram experienced an 81% lift in digital transactions over 2019. Nonetheless, digital is still just a little over one-fourth (28%) of all MoneyGram transactions. Like Western Union, MoneyGram has scrapped its forward outlook for the rest of the year.

The evolution of MoneyGram and Western Union signals the advance of digital payment companies that have been investing heavily in more streamlined versions of the same model. PayPal has made Venmo a critical component of its strategy for expansion. Although Venmo has yet to turn a profit, it serves as a loss leader for PayPal as it promotes other products to merchants, like credit and multichannel payments. PayPal also acquired Xoom in a more direct attack on Western Union and MoneyGram’s markets.

In March, another of its competitors, TransferWise, partnered with Ant Financial’s Alipay, opening an addressable market of 700 million users. TransferWise has also linked to Square’s Cash app.

All of these companies are seeking to cash in on a large remittance market that’s taken on water in the coronavirus pandemic—which increases the pressure. And again, the pandemic has moved people away from cash to contactless payments because of concerns over cash carry the virus. While that risk maybe extremely small, remember the pathogens that are found on most every dollar bill.