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MoneyGram International Inc (NASDAQ:MGI)
Q3 2019 Earnings Call
Nov 1, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the MoneyGram International Inc. Third Quarter 2019 Earnings Release Conference Call. [Operator Instructions]

It is now my pleasure to turn the floor over to your host Wendi Schlarb Head of Corporate Communications. Please go ahead.

Wendi Schlarb -- Head of Corporate Communication

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 financial summary slide deck which is intended to supplement our prepared remarks during today's call and provides the reconciliation of differences between GAAP and non-GAAP financial measures. We will refer to non-GAAP metrics on the call. The non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP. They are included as additional clarifying items to aid investors in further understanding the company's quarterly performance in addition to the impact that these items and events had on the financial results. Please note that today's call is being recorded. During this call we will be making forward-looking statements which are predictions projections or 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 during 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 & Chief Executive Officer

Great. Thank you Wendy. Good morning everyone and thank you for joining us today. I'd like to begin by highlighting just a few of our key accomplishments thus far in 2019. First and foremost our business transformation continues to accelerate. This has largely been driven by the continued success of our digital transition our customer service experience improvements and the geographic diversification of our revenue. While total company revenue was down on year-over-year basis on a sequential basis reported revenue has stabilized. At the same time for the quarter excluding the U.S. to U.S. business we reported positive transaction growth for total money transfer transactions led by strong growth outside of the United States. For the quarter our non-U.S. money transfer transactions reported a 7% year-over-year growth rate while also delivering a return to revenue growth. Operational efficiencies across the company continue to drive positive returns and enabled us to report $57.5 million of favorability year-to-date for adjusted non-commission expense. And finally we're proud to lead the industry in innovation becoming the first money transfer company to launch Visa Direct and also the first to utilize blockchain capabilities at scale through our strategic partnership with Ripple. I'll touch on both of these partnerships in greater detail shortly.

But before we dive into the detailed updates for the quarter I'd like to take a quick step back to highlight the key tenets of our transformation and show how our business has changed significantly over the past couple of years as we focus on diversifying our revenue mix and delivering a differentiated customer experience. First, we focused on diversifying our leading position in the cash business by rapidly expanding our capabilities and partnerships to enable consumers around the world to conduct digital transactions. To do so we built a new app, redesigned our money grant branded website and delivered this simple user friendly experience directly to consumers in 25 countries. On top of that, we've enter digital partnerships leading companies around the world so that customers can now send or receive money in over 60 countries. Through this effort, I'm excited to share with you that digital transactions now account for 20% of total money transfer transactions. Second, we focused on diversifying our revenue mix geographically to align with the global remittance market growth rates, pursue higher margin corridors and concentrate on serving our core customer segments. 60% of total money transfer revenue now comes from business generated outside of the United States. And as I mentioned in this area we reported a 7% year-over-year growth rate in transactions for the quarter.

Third as we increasingly shift to a direct-to-consumer business we want to compete and win by providing a differentiated best-in-class experience that delivers a seamless connection between senders and receivers. As we've invested in initiatives to improve the customer experience, features such as transaction notifications, promo codes, enhance customer care, a revamped loyalty program, and a simple and elegant user interface design of our new app and websites have all been delivered tomorrow. In the past 20 months, all of these initiatives has led to a significant improvement to the customer experience, which has in turn enabled us to acquire new customers and retain an increasing percentage of existing customers. Furthermore, it's important to highlight that another key part of our digital transformation has been to modernize our back office operations and digitize each customer touch points, whether online, in store or through our customer care teams. And on this front we continue to make great strides as well. For example we're now sending over 100 transaction notifications per minute to our customers. As such they no longer need to call MoneyGram to check on their transactions.

And as a result calls to our call center have been cut in half. On Slide 5 you'll see another view that highlights our transformation as a business. And that is the continued growth in MoneyGram Online which grew nearly 20% overall in total transactions. If you exclude the U.S. to U.S. corridor the business grew by 50%. Over the past 6 months we have focused on repositioning our online U.S. Outbound business through reduced prices and enhanced marketing. The changes we implemented are already demonstrating success results as our U.S. Outbound business reported an almost 30% year-over-year increase in transaction growth for the quarter. In the U.S. to U.S. Online space we've also taken significant steps to change the business and better compete by changing our pricing strategy and launching Visa Direct. These actions along with the strength of our digital assets are also starting to turn this business around. For example MoneyGram U.S. to U.S. Online volume exclusive of any co-branded sites reported sequential transaction growth for the second consecutive quarter after previously reporting 4 quarters of flat or declining transactions. Furthermore since the beginning of the year new customers have increased by nearly 20% and we've also seen our return customer rate increase by 40%. The most significant growth in our online business is still coming from outside the U.S. where we have achieved 109% year-over-year transaction growth for the quarter with 42% revenue growth.

This strong growth has been powered by our expansion to new countries where we're reaching a net new customer who has in most cases never used MoneyGram before. These customers once they try MoneyGram online are also more likely to stay with our brand due to the simple experience and the numerous receive options available to their friends and families. Now a large part of our online success has also been driven by the overwhelming positive enthusiasm for our new app. The app continues to exceed expectations and deliver a strong return on investment. Since its launch at the end of 2018 over 1.2 million consumers have downloaded the app and it's now one of the highest-rated consumer apps in the industry. Last month we saw an all-time high in the number of customers who returned to send money via the app and new customer retention rates continued to exceed expectations. This app is live in 25 countries and is attracting a new younger customer segment who have largely never used our walk-in services before. In fact the combination of growth in new customers and higher customer retention rates have led the app to double its contribution to total online transactions in less than 9 months. Today 80% of total online transactions are done on a mobile device which is great news because mobile customers are stickier. Again we couldn't be more pleased of the success of the app and we're preparing to focus on enhanced digital marketing efforts in 2020 including launching a referral program to help bring our leading app capabilities to more people across the globe. As you know in the quarter we launched our new partnership with Visa. This partnership is another example of our innovative work to improve the customer experience by seamlessly connecting senders and receivers with instant transfers.

The partnership provides consumers with additional choices on how to receive funds and when fully rolled out the capability enables us to push payments to over 1 billion cards worldwide. Consumer adoption has been strong so far. And we're particularly excited to see that over half of the customers are net new to MoneyGram. We're proud to be the first money transfer company to go live with Visa Direct and we're working quickly to expand the partnership to additional corridors in the fourth quarter. Furthermore in the coming weeks we'll be making an additional exciting announcements about the latest innovation to our Visa Direct Service that will enable customers to send money much faster and easier than they're able to today. Overall we believe these new capabilities will enable us to continue to disrupt the industry accelerate U.S. Outbound growth and better compete in the U.S. to U.S. market with a service that is as good or better than any of the other existing options. Now as you can see on this slide the loyalty program continues to build momentum. The number of loyalty members is increasing and the average number of transactions per loyalty member is also increasing. These two factors are a powerful combination that will be key to our ongoing success.

This chart also illustrates that point by showing how our loyalty members' contribution to our business continues to increase. At the beginning of the year loyalty members accounted for about 21% of total transactions. Today they account for 27% which is outstanding. Due to our success in the U.S. we've expanded the program to 4 more countries during the quarter and international expansion of the loyalty program to more markets will be a key focus as we move toward the end of this year and into 2020. I'm pleased that MoneyGram's amazing service and Global brand continued to lead to both key contract renewals and exciting new signings in both the walk-in and digital space. First and foremost we're pleased to announce the extension of our agreement with Walmart into 2021. This contract extension serves as a testament that Walmart recognizes the high-quality of the MoneyGram service and network. We continue to align and partner on the future of the industry and have innovated to not only offer the world's leading money transfer service but to also protect consumers from fraud. As always I thank Walmart for their ongoing partnership and I am excited about the next stage in our relationship.

During the quarter we were also very excited to sign a contract renewal with CVS. CVS has been a long-standing partner and a pioneer in the space with the launch of our innovative POS solutions several years ago. As we enter the next stage of our relationship with CVS we're excited to collaborate on ideas and initiatives to further improve the customer experience at their great chain. In addition to these key renewals we're also launching many new exciting partnerships around the world. During the quarter we launched and signed a new partnership with Agricultural Bank of Egypt. This relationship will help expand our presence in the fifth largest remittance market globally a market where remittances account for a significant portion of the country's GDP. In the U.S. we signed with Brightwell where we've been integrated into the company's payroll solution for cruise ship workers. This partnership enables crew members to send money digitally straight from their paychecks to friends and family in over 200 countries and territories.

The partnership also highlights an opportunity move upstream in the remittance space which is something we'll continue to explore and evaluate. And lastly through our direct bank partnership team we signed a new agreement with Bank Alfalah to enable account deposits in Pakistan. Account deposits are an increasingly popular receive option for consumers and we're very excited about the growth in this channel and the potential to accelerate our business in Pakistan. Turning now to our other very exciting news in the quarter. And that of course is our partnership with Ripple. To date we've integrated Ripple onto our standard treasury process to execute foreign currency trades 24/7. Over the quarter we've continued to increase our usage of Ripple's on-demand liquidity product for a portion of our daily funding needs in Mexico. As a result of this success we're working to expand the partnership to new corridors before the end of the year. Furthermore we're also in the process of developing a road map on potential new use cases to improve our digital payments offering. So this will take some time to achieve. We believe that it will lead the industry in accomplishing this vision and that our partnership with Ripple will be a competitive differentiator in the months and years ahead but Larry will talk more about that in a few minutes. Now lastly before I turn the call over to Larry I'd like to briefly discuss the prevailing misperception.

Various stakeholders continue to ask me if we plan to remove any of our compliance controls specifically our ID requirement because some competitors continue to complain that it's unnecessary to collect ID. Now let me set the record straight. The compliance controls that we've put in place are working as designed. We're preventing consumers from being defrauded and we're turning away bad actors. A recent experience with one of our nonexclusive agent partners sets a perfect example. An agent reached out to us with a list of names of individuals that he described as his best customers. Customers that he had diverted to the competition because he believed that MoneyGram had incorrectly blocked them from transacting. So we went through those names one by one reviewed the attempted transactions and found that our controls were accurate. We have successfully prevented good customers from being defrauded we have successfully screened out known fraudsters and we had blocked individuals who are on local government watch lists. Unfortunately many of these individuals ended up transacting with one of our competitors. I'm proud that we have derisked our customer base we continue to report the lowest fraud rates in the industry and that we're leading in protecting our agents and customers.

With that I'll turn the call over to Larry.

Larry Angelilli -- Chief Financial Officer

Thanks Alex. The results for the third quarter represent another important step in the stabilization of the company's revenue and EBITDA as well as a return to growth in most of our major markets and corridors outside of the United States. As we anticipated revenue and adjusted EBITDA were down year-over-year. However on a sequential basis Q3 revenues of $325 million saw a slight improvement to the $324 million of Q2. The driver of this trend is the growth of our digital properties in our non-U.S. walk-in business offset by declines in the U.S. market. Adjusted EBITDA was approximately $52 million versus approximately $54 million last quarter. As you can see on the chart we grew 2% in revenue year-over-year outside the U.S. on higher transaction volume of 7%. The diversification of the company to outside the U.S. should continue to positively impact our results now that our U.S. to U.S. business is less than 7% of our total revenue. As you know the U.S. market is becoming increasingly competitive. And our competition large and small is not only pricing aggressively to consumers but also importantly increasing agent commissions in their attempt to buy growth. We believe that buying growth is a shortsighted strategy and with margins in the U.S. that are increasingly thin profitable growth will be harder to come by.

Not just for us but for all those who are targeting the U.S. walk-in remittance market. As I mentioned adjusted EBITDA was $51.7 million on a reported basis for the quarter down from $59.5 million a year ago and $54.3 million sequentially. We had expected this trend of an increasingly competitive pricing and commission environment that was beginning to pressure our margins. We have set part of that lower gross margin with continued success in our operating cost reduction efforts. Adjusted non-commission expenses were $399 million for 9 months down 13% year-over-year. As has been the case this improvement is independent of declines in volume and the company continues to improve its competitive position with increasingly scalable expenses further enhancing our ability to benefit from a return to growth. Total compensation and benefits for 9 months decreased $38 million or 19% from last year. As we've completed important milestones in our digital transformation we continue to discover new opportunities to become more efficient and scalable. We believe that we will still have opportunities to reduce costs on a sequential basis which will enable us to maintain margin if pricing pressure and commission pressure continues.

Some examples for future savings include our migration to cloud computing and our continued success in reducing inbound phone calls as Alex mentioned which is evidence of an improving customer experience. we announced rivulet investment in the money gram, it has many questions on the impact of this partnership. From a financial and operational perspective, I'd like to take this opportunity to describe how we're using the blockchain and its benefits of money gram. The ripple blockchain enables money grant to achieve what we are calling real time settlement. Currently, money Graham is using ripple to facilitate What are almost instant foreign exchange trades. In Mexican peso, for example, we purchase the cryptocurrency XRP on a US exchange, transfer it to an exchange in Mexico and sell the XRP on the exchange in Mexico for pesos all within about 60 seconds. Essentially, we're using cryptocurrency as a unit of measure through the ripple blockchain. This means that we can reduce our inventory of pesos and reduce our exposure to volatility during the shortened time that we need to hold them. This is just like just-in-time inventory for our currency position reducing our working capital needs as well as matching the timing of our sends and the settlement with our agents.

The majority of these benefits will come with scale in the future. In addition to those benefits we are compensated for developing and bringing liquidity to these markets as well as providing a reliable level of foreign exchange trading activity on a daily basis. The third quarter was the first time we recorded revenue from this agreement. Today we're driving about 10% of our daily Mexican peso volume through this technology. Through our partnership with Ripple as we develop new markets and bring our liquidity to these markets our trading volume will be in significant scale to the foreign exchange markets using this blockchain technology. We expect to add new currencies in the fourth quarter and develop new currency pairs that don't include the U.S. dollar over the coming months. On top of that we believe that we can develop new digital products that would benefit from real-time settlement as XRP markets become more established and more liquid. We expect a general increase -- I mean I am sorry a gradual increase in the impact on the company as we pilot new markets and bring them to scale with Ripple's assistance. And finally with the visibility that we have today on the rest of the year we're providing outlook for the fourth quarter of 2019. For the fourth quarter the company anticipates total revenue of approximately $330 million and adjusted EBITDA of approximately $50 million.

And now I'll turn the call back to Alex.

W. Alexander Holmes -- Chairman & Chief Executive Officer

Great. Thank you Larry. In summary our business transformation is progressing increasingly digital increasingly diversified and increasingly differentiated by customer experience. We've achieved overall strong performance outside the United States and continue to work hard to turn the U.S. business. Operational efficiencies are driving expense reductions and our innovative partnership with Visa our innovative partnership with Ripple are both progressing and we're beginning our journey toward our future vision of global real-time settlement.

Now I'll turn it over to the operator and we're ready for your questions. Thank you.

Questions and Answers:

Operator

[Operator Instructions] We'll go first to Ramsey El-Assal at Barclays.

Ramsey El-Assal -- Barclays -- Analyst

Hi, guys, and thanks for taking my question. So on the Ripple technology we should conceive of that as really more on the costs side. There's not a revenue-generating opportunity that might come from the technology at some point in time? Or are you -- maybe a broader way to ask that question is are you imagining or experimenting with potential revenue-generating opportunities from distributed ledger or Ripple? Or is it really more just sort of something that which should help you in terms of the cost structure of the business?

Larry Angelilli -- Chief Financial Officer

I think in the short term there'll be a revenue piece to this. Right now it's relatively minor. It's included in other revenue but there will be revenue associated with the Ripple agreement. And then over the longer term it will have cost benefits as well. So that's -- we're looking at it from both the short-term and long-term perspective.

W. Alexander Holmes -- Chairman & Chief Executive Officer

Yes. I think to add to that if you think about what the potential is is to really utilize the technology to match almost perfectly matched consumer transfers with the settlement processes. Because as you know those processes are very different today right? We prepositioned cash flow around the world. And so the more real-time we can make that the more efficient we'll become and the better revenue opportunities there are. I think right now we're using the on-demand liquidity platform. But there are opportunities through RippleNet to begin to move money directly into accounts with other partners inside of Ripple. So those are all there. And those are conversations that we're having and excited to ramp those up and get those going which will all be new revenue opportunities for us.

Ramsey El-Assal -- Barclays -- Analyst

And I wanted to also then to ask about Visa and your Visa Direct relationship. Can you kind of give us more commentary flush that out a little bit in terms of what's driving the consumer adoption? Is it just the broader reach of the product? Means there are more customers that have a use case for it? Is there a particular channel that's proven important in terms of rolling out new customers? Just a little more granularity on that partnership and the product itself would be great.

W. Alexander Holmes -- Chairman & Chief Executive Officer

Yes. No love to it's a great question. Visa is an amazing product amazing service all around the world. And I think what they've created with Visa Direct is really interesting and super compelling. We've said for a long time or at least in the last couple of years that I think that the U.S. to U.S. domestic walk-in product is under a lot of pressure. Obviously the results of our competitors would say the same. And I think that's largely been driven by not only the cost of the service and the walk-in space but I think also the alternative solutions that consumers have in the P2P space. I was really pushing the team hard to get this service live as soon as possible it took a little bit longer than we wanted but right now we're using it domestically and you can go online and send money directly to Visa cards visa debit cards in the United States and the adoption of that from our consumer base and from new consumers I think we said about 50% are new to MoneyGram. It's just been remarkable. I think it brings a value-added service at a reduced fee that we can still make nice margin on obviously it's lower revenue per transaction but the profitability is great.

So it's really super super interesting. And I think for the first time MoneyGram has a product that's relevant in the P2P space domestically that allows us to compete with some of the other services that are out there. What we want to do with it and what we're going to do with it very shortly is expand that cross-border and really be the first company that is doing real-time account-to-account movement through Visa Direct to multiple countries across borders. So if you think about what a Zelle or potentially even like a Venmo competitive product domestically it looks like this is sort of that cross-border which I think is really interesting and definitely very compelling for a number of consumers out there. First and foremost consumers that we have today but I think more importantly consumers that don't utilize the MoneyGram service today. So from an expansion perspective it's really very interesting. We're also -- I can't really tell you exactly what it is but we also have a couple of enhancements to the service when we begin to move it cross-border and enhancements to the domestic service as well which I think are going to be really exciting to see and we'll be excited to talk about those in the coming weeks as we get those live in market because they're going to really kind of change the way the experience works which I think will be super additive to growth for that service.

Ramsey El-Assal -- Barclays -- Analyst

That's really helpful color. Thanks so much.

Operator

We'll move next to Kartik Mehta at Northcoast Research.

Kartik Mehta -- Northcoast Research -- Analyst

Good morning, Alex. Alex as you look out to 2020 and I know you're not giving guidance. But as I look at kind of each quarter you reported in 2019 it seems like the revenues are stabilized around $330 million. And I know you and Larry in the past have said you kind of have to figure out where revenues stabilize. Do you think this $330 million is a stable level of revenues a quarter for you guys going forward?

W. Alexander Holmes -- Chairman & Chief Executive Officer

Seasonality aside it's certainly in the ballpark. I think the question for me it continues to be the efforts here to turn around the U.S. walk-in business particularly since the Latin America. That has been a frustrating I think portion of the story here and something that we continue to work extremely hard on. But getting our U.S. Outbound growth back to where we need it to be is going to be kind of critical to the sustainability of those numbers I think. As we highlighted the non-U.S. business is doing well. It's a bigger piece of the business and continue to show some good improvements. We still have some work to do in a number of areas. I still think we're a little soft in the Asia Pac region but Middle East Africa are good. Europe can do better. It's been performing well but Europe needs to kick it up a little bit more but it's started to just come back to the U.S. market. And we got to get that going. And again we've talked about a lot this year and last year just some of the challenges there but we get that going I think that those numbers will be definitely where we can be.

Kartik Mehta -- Northcoast Research -- Analyst

And then Alex it seems like the business for you as you said is changing more online. You have your app this potential Visa Direct using cross-border. And so the agent base seems like it's -- you're going to use it less either from a send standpoint or receive standpoint depending on what the consumer does. Does that ultimately help you from a commission standpoint? Or does that change maybe how you structure your agreements with your agents?

W. Alexander Holmes -- Chairman & Chief Executive Officer

It's a good question. I think the message that I think we're trying to send maybe more succinctly is that the walk-in business and the digital business are just different. I think where they overlap is that the vast majority of digital sends are still picked up in cash but there is a growing opportunity for sends to account since the wallet and these things which are picking up a lot of momentum particularly from an online-to-online perspective if you will. So I think that there's a lot of momentum in a number of different places. But I think the walk-in business is super strong in just so many markets around the world. I mean if you go through Africa Middle East parts of Asia Latin America even in the U.S. retail space for example the cash business is a supercritical piece. And I think it's as competitive as it's ever been and it is hard to turn those markets and win business. We're being more aggressive with agents.

And in fact I think probably a little bit in contrast to your question I think we're being more aggressive on commission more aggressive on incentives and trying to do more at the point-of-sale to show a better value-added product and that's where some of the digital overlay comes in as well because I think consumers are looking for a digitized experience. That doesn't mean they need to transact digitally like with a bank account but that does mean that they're looking for that better customer experience which is where the loyalty program transaction notifications promotion codes online registration to do walk-in sends and these types of things are pretty critical. So listen I think at the end of the day I think our commission rates are probably going to be able to be flexed down in some markets.

But I think in general they'll probably be stretched a little bit and others as we look at incentives. I mean the reality of a nonexclusive world is that you have to compete not only for the customer but also for the agent share of mind. So at the same time I think our digital assets and the consumer direct side of that will grow and grow extremely quickly. And today I think about 80% of those customers are all new to MoneyGram. So I think it's a mix but I do think that the walk-in business and the digital business have some overlap in feature functionality but just in terms of who that consumer particular on the send side is I think it's just a -- it's a different market right now.

Kartik Mehta -- Northcoast Research -- Analyst

Thank you very much. Appreciate it.

Operator

We'll go next to Bob Napoli at William Blair.

Bob Napoli -- William Blair -- Analyst

Thank you And Good morning, guys. The operating margin in your global funds transfer business I think is probably running far below where you want it to be. I mean obviously you need to get your profitability up your EBITDA margins up in order to -- given -- to generate a reasonable level of profitability especially given your balance sheet is any -- what is the right margin for that business? And how do you get there? And how long does it take? Especially since it sounds like you're -- I mean you don't feel like -- you're hoping to hold revenue and stop shrinking as opposed to growing in the near term.

Larry Angelilli -- Chief Financial Officer

Yes I think that is the biggest challenge when you're getting sort of inverse economies of scale which are shrinking. The -- it's really a mix issue globally. Our fastest-growing properties are at a lower margin than the traditional U.S. business was. And I think that changes over time as we get to scale on some of those products. We're also starting to see now kind of as we speak. Some of other global markets that have more traditional markets returning to growth. So I think this year was a case where we were declining in some of our more traditional higher-margin businesses. And then as we return to growth in some international markets that have more normal markets and get to scale on our digital stuff it will bring those margins back. Ultimately just like any other business I think revenue growth leads to margin expansion. And I don't think we're exempt from that. But the U.S. to U.S. market is really the biggest driver at this point.

Bob Napoli -- William Blair -- Analyst

Okay. And then now your online transactions were up substantially I guess transaction growth of 100% and looking to add in revenue growth of 40%. What is -- so there was -- what is going on with the pricing? And what is the -- I mean the -- I guess maybe what the outlook for profitability on that business? Sounds like -- I mean it suggests that you had a major price cut.

W. Alexander Holmes -- Chairman & Chief Executive Officer

Yes. I would say a couple of things on that. There is definitely a blend in that business. Listen I mean just pausing on that before I answer that specific question I would say just generally speaking I think we've been consistent for quite a while saying we fundamentally believe that pricing in our business across the board needs to come down at a number of markets that needs to be flexed to be relevant to consumers. We've done a lot with pricing experimentation not only launching in new markets at very low introductory prices but also changing prices in traditional markets like the U.S. to U.S. business and then the U.S. Outbound market. I mean we've taken prices in the U.S. to U.S. for example from $13 $14 $15 online down as low as $0.99 and then back around again. And then settling in on some different prices. We've played with prices in the U.S. Outbound market. What we're doing is looking for that inflection point where we can find the right number of consumers adopting that price bringing in new consumers but then also bringing returning customers back in.

I think we've done a very nice job of that. It's obviously put some pressure on revenues in the U.S. business and it's also put some pressures in the international business as well when we've changed the prices in some of our legacy markets over there like the U.K. and Germany. But the net result of those changes has been a material shift in the number of customers and transactions coming in and our growth continues to accelerate even against the backdrop of what continues to be a lot of noise from new or legacy competitors entering those markets at the same time. So I think pricing is sensitive. I think it's an important aspect of what we do. But pretty much when you look at that non-U.S. the revenue growth it's really related to introductory price points but also changes in prices in the U.K. and Germany which are markets that we've been in for a long time. Again we were seeing kind of nice margin but relatively slow growth change those price points and suddenly the growth is fantastic.

From a profitability perspective as Larry said it's knocking into profitability a bit. But I think the margin on it is quite good. And I think that the growth that we're going to see from customers and repeat customers will more than pay for itself over time. That's why we're also spending so much of our time focusing on how do we make our business more efficient from a back-office perspective and streamline our operations get more efficient on go-to-market strategies in kind of how we operate so that we can actually better compete in a low price environment where driving transactions consumer adoption of repeat customers is really critical to long-term success.

Bob Napoli -- William Blair -- Analyst

Thank you appreciate the answer

Operator

We'll move next to Rayna Kumar at Evercore ISI.

Rayna Kumar -- Evercore ISI -- Analyst

Morning thanks for taking my question. You recently put out an 8-K indicating an extension of your Walmart agreement but also commented that it isn't exclusive. What's your strategy if Walmart adds a second money transfer provider to the cross-border contract?

W. Alexander Holmes -- Chairman & Chief Executive Officer

Yes. Listen I think that Walmart is not really dissimilar to a lot of the rest of the market which is non-exclusivity is becoming more of the norm I think than not. I think that competing in that environment really requires you to have best-in-class product with best-in-class service and pricing. And that's exactly what we're focused on. I think that between MoneyGram and then I guess I'd add Western Union. We're the only ones that run a really dynamic what we call will-call service which basically gives customers access points to all of our network in those foreign markets.

I think we've done a very nice job with FX management in the last couple of years. I think we've done a nice job adding a lot of service enhancements things like the loyalty program that we've talked about transaction notifications etc. So it's really going to be -- oh and also I suppose I should add the compliance side as well that consumers. I think the changes that we've made and the adoptions that consumers are seeing in our fraud prevention is adding a lot of value to the service. So listen I think we know Walmart is a great partner. They have visions of how they want to run their business longer term. And if that involves competitive services at the point of sale then I think we're more than ready to compete.

Rayna Kumar -- Evercore ISI -- Analyst

Got it. That's very helpful. And what's your early outlook on 2020? Do you continue to expect EBITDA to grow next year?

Larry Angelilli -- Chief Financial Officer

We're going to pass I think on trying to guide anybody to 2020 at this point.

Rayna Kumar -- Evercore ISI -- Analyst

Okay, fair enough. Thank you.

Operator

We'll go next to David Scharf at JMP Securities.

David Scharf -- JMP Securities -- Analyst

So yeah, good morning. Thanks for thanks for taking my questions. Hey a couple of things. One just a little more granularly. Can you comment on U.S. to Mexico trends given that it's the most significant corridor still I believe? I think last quarter Alex you mentioned that Latin America in aggregate was a bit slower than expected given compliance constraints. But directionally is U.S. to Mexico turning the corner in terms of reaccelerating?

W. Alexander Holmes -- Chairman & Chief Executive Officer

The answer to that question is a bit mixed I'd say. In certain areas I would say that the growth is turning and accelerating in aggregate. No we're still facing significant challenges in the walk-in space around the Latin America business. And Mexico in particular we were -- we've had a couple of months that have been good and sort of encouraging and others that have been continually frustrating. So we have some work to do in the U.S. retail space. The smaller mom-and-pops we have a lot of initiatives under way there to begin to reposition win that business back I would say. The online business looks very good it's in Latin America right now. So it's really kind of that U.S. retail space. So yes no Mexico is down and that's definitely a drag on the U.S. Outbound numbers.

David Scharf -- JMP Securities -- Analyst

Got it got it. And can you just refresh my memory on -- it was helpful that the comments about the company's requirements of collecting ID I believe about -- maybe it was a year ago and you may have talked about how for U.S. Outbound. I mean obviously anonymity has always been something that a lot of remittance providers have placed a premium on. And I think it was for all transfers below $3000. They didn't -- you know a lot of competitors didn't collect anything. Can you remind us sort of what the benchmarks are right now? I think at that point you said that you had been collecting ID for any transaction under $900. But are you collecting it for every single transaction? I'm just trying to get a sense for sort of scope and maybe the percentage of transactions that fall under the ID collection.

W. Alexander Holmes -- Chairman & Chief Executive Officer

Yes. No it's a good question no problem. Yes. So standard BSA requires a lot of information to be collected at $3000 including ID. Below that there really is no standard. I would say in the state of Arizona they do have a strict $1 ID requirement everybody else doesn't really have one. I would say the industry has kind of defaulted to this $800 $900 range. I don't know why but that's just kind of legacy sensitivities of transactions over $1000 I guess. And below that there really are no ID requirements. There's actually really not any requirement on data you collect about a consumer in general. You need their name obviously. But beyond that it's -- there really aren't any specific strict guidelines. So we try to do is standardize that. Obviously we've had a lot of changes to our compliance systems and our compliance controls. And in order for those systems to work properly you need to know who a customer is. The data that we collect is basically your name your address your phone number and your date of birth. And we do collect your ID at $1 on both sends and receives. And I think that's pretty standard practice in any financial industry check cashers all do it. Pretty much all banking has that requirement I think probably really -- maybe the prepaid space and the money transfers are probably the last place in the world where you can do financial transactions without showing that type of information.

I think yes as I've said a few times that we have absolutely no problem conducting business with consumers that are willing to give us that information. And most consumers have no problem giving us that information. I certainly understand if you are in the country is an unregistered citizen or may be illegal in the country or if you're maybe legal but just concerned about giving that information. Yes clearly you have alternative choices. And you'll go to those. I think the information that we've gathered and that we get from the collection of that information has been absolutely phenomenal. When we try to prevent fraud when you try to make sure that consumers aren't sending too much that you're aggregating properly for reporting purposes on volume sent and these types of things. Having that type of information is absolutely critical to knowing who your customers are. And quite honestly if you're not collecting that data it's just -- it's really hard to know who a customer is and whether or not you're doing the right things from a compliance perspective. So the requirement for ID the other thing I'll just mention here is that we put that in ourselves. We were not told to put that in we were not required to put that in. It did get added subsequently to the extended DPA and FTC order that we signed.

They added that in there because we were already doing it not because they deemed it that we had to do it. But no the value of it is incredible. And in fact one of the things you face in the fraud world is fake IDs. And so actually a lot of our algorithms and rules run against IDs as well so that we can stop and block fake IDs which I think is probably unique in the industry right now. So it's resonating well. Every compliance officer I meet with at every bank at every provider but unfortunately a lot of our competition sells really really hard against that and tries to create the perception that we're blocking people unnecessarily or stopping good people from transacting or whatever it may be. And that's a pretty -- pretty highly utilized sales pitch for almost all of the competition right now. And I would say that that's probably one of our -- one of the harder things to overcome in the nonexclusive market right now is the misperception that the competitors are spreading.

David Scharf -- JMP Securities -- Analyst

Right right. No that's helpful color. Switching to I guess Ripple maybe following up on one of the previous questions on understanding kind of the long-term opportunity. To the extent that its scale the opportunity here is savings on settlement cost. That's how I sort of read this. First of all does this show up in the transaction and op support line? I mean I'm trying to sort of quantify what the -- not the risk but I guess the cost is today of settling in currencies which my understanding is that at most you're just taking a 24-hour position in a currency. And particularly something like the peso which is a fairly liquid tradable currency it wouldn't seem like there's a tremendous amount of risk in that 24-hour settlement. So as we think about real-time settlement with Ripple can you help us really understand just how much costs savings opportunity there is? Because you obviously sold 10% of the company for -- in part for this partnership?

Larry Angelilli -- Chief Financial Officer

Yes. Well it's -- in the quarter there's nothing material in -- there is some portion of an immaterial amount in revenue. In the long term to get into your specific questions about like the peso for example. Peso even though it's a very liquid currency it's very volatile. It can be 2% in a day. And what we're really talking about there is basis risk is that we have an instant product customers can pick up the money within minutes. We have to settle with our agents generally within hours. And we have a position in Mexican peso that can reprice on a real-time basis. So when you think about that and then you think about all the currencies that we have exposure to eliminating basis risk it doesn't show up in your P&L. What you really have is a mismatch that impacts margins but without really on a line item. And the other thing that doesn't show up specifically is the amount of capital that's required to essentially prefund all of our foreign exchange markets all over the world. And that's the point we're making about the future state requiring scale.

And I don't think in 1 quarter doing 10% of our Mexican peso volume through this product. It didn't really materially change the amount of working capital that we needed. It didn't materially change the basis risk that we experienced on Mexican peso. But you can think about the future state where -- when this does become a meaningful part of our currency pairs. And when you're taking that timing and matching it to the settlement of a transaction and then actually designing products that can benefit from that. That's where we think it does start to resonate. And so it really -- it's a hard question to answer because I can't tell you "Oh T&O is going to go down 2% because we're using Ripple." It has all these interest rate interest expense could be impacted the -- and margins in general. So it's really a long-term -- it changes the way we can operate. And in the near term it's favorable to the company in its development phase and then it's favorable to the company in a long-term basis.

W. Alexander Holmes -- Chairman & Chief Executive Officer

Yes. I mean I think adding to that because I think that's said very very well. I mean I think the deal is not about the foreign exchange U.S. dollar Mexican peso right? I mean it's more where Larry was going. It's about how do you fundamentally change the way that settlement works globally. And how do you fundamentally create real-time settlement real-time in market. And I think that that's what's so interesting and so compelling about this right? If you think about 20000 plus corridors all over the world with money moving from Point A to Point B. What we're always kind of doing is running a book that's bringing that back to U.S. dollars in many ways. And I think as we've talked about in different ways over the years you don't conceptually need to do that. You have to do that because of the way that systems and banking work today. But in a blockchain world that's really not necessary.

And I think the scale and efficiency you can create with that and the sort of the permutations of value created through moving money into bank accounts while it's keeping it in market as liquid as possible from a real-time basis. It's just so compelling. And it's not like you can do that in the morning. But over the next several years I mean that opportunity is just sitting there. And I think the company they can take advantage of that and monetize it is going to do exceedingly well. And that's what we're running hard against and hard at because I think it's an awesome opportunity to just fundamentally rethink how money really moves around the world and how you actually offer and provide service and value to customers.

David Scharf -- JMP Securities -- Analyst

Got it. No no that's great context. Hey one last cleanup question for Larry. The delta between the cash and noncash interest of about $5.5 million. Should we interpret that as PIK interest on the junior notes? Should we add $5 million to the balance of those notes for the calculations?

Larry Angelilli -- Chief Financial Officer

Yes I think that's correct. Yes.

David Scharf -- JMP Securities -- Analyst

Okay, got it. Thank you.

Operator

We'll go next to Mike Grondahl at Northland Securities.

Mike Grondahl -- Northland Securities -- Analyst

Yeah, guys, Just following up on the Ripple questions. Could you spend a minute and maybe the revenue opportunity with Ripple I'm still having a little bit of a hard time understanding it. Could you go over that one more time?

W. Alexander Holmes -- Chairman & Chief Executive Officer

Yes. I mean I'll take a crack at it. Maybe hearing a new voice on the same topic. As interesting as my colleague is so I'm teasing. Anyway the -- no I mean there's a couple of things going on. So first and foremost right we did the efficiencies on the FX trading and management. We also have an arrangement with Ripple where as we bring volume and liquidity to markets we share in the benefit of that. So there is upside to us as we grow and provide liquidity to those platforms. The way that that's actually calculated and how we're in essence compensated for that is probably not something we want to get into from a competitive perspective but suffice it to say as we bring liquidity to those markets and we push volume across the platform we do get compensated for that and that is recorded as revenue. You want to add to that now?

Larry Angelilli -- Chief Financial Officer

Which was -- which hasn't really shown up in revenue yet.

W. Alexander Holmes -- Chairman & Chief Executive Officer

Yes. And that's kind of the base agreement. Now as we expand into more corridors and then we start to utilize things beyond the on-demand liquidity platform and begin to use things like RippleNet. Now we're talking about like real-time account deposit type services utilizing XRP and blockchain into partners on the RippleNet exchange or service whatever you want to call it. And that is also revenue for us as well as we begin to utilize that for money movement as well. So there's revenue coming from that. We don't have any specific to that yet but that is on the roadmap and pipeline for the coming months.

Mike Grondahl -- Northland Securities -- Analyst

Got it. Okay. That was a little bit helpful. And then just lastly...

W. Alexander Holmes -- Chairman & Chief Executive Officer

A little bit is better than not.

Mike Grondahl -- Northland Securities -- Analyst

Sure. The loyalty membership going from 21% touching transactions to 27%. How do you see that developing in 2020 and 2021?

W. Alexander Holmes -- Chairman & Chief Executive Officer

Well if I had my way it would go to 100%. But I'm going to get some eye rolls from the marketing department because it's probably not practical. But I think it's going to continue to expand. I mean it will certainly expand as a percent of the business simply as we roll it out to more and more markets. But there's really 2 pieces there. I think one is how much of that is from new customer enrollment and new customer transactions and then how much of that is actually from repeat customer utilization and increases in transactions per customer. And right now most of it is -- well actually let me pause on that. There's obviously a piece of it from rolling out the new program. And then there's a large piece of it from rolling it into new markets. But the -- where we've rolled it out the increase in transactions per customer has been very very strong. So that's exactly what you want in a loyalty program which is not only more people enrolling in it but also stronger retention rates of customers in getting repeat customer utilization. So we're seeing strong adoption in both. And so I'd expect that number to continue to go up. Anymore?

Mike Grondahl -- Northland Securities -- Analyst

Got it. Okay. Thank you.

W. Alexander Holmes -- Chairman & Chief Executive Officer

Thank you.

Operator

And next we have Tien-Tsin Huang with JPMorgan.

Tien-Tsin Huang -- JP Morgan -- Analyst

Great. Thanks for getting me on. Hey guys. Just a couple of quick ones. Just on -- I think the Walmart renewal question was asked already so I won't go there but how about CVS and just your traditional issues. I know you mentioned commission a little bit but any change in pricing term? How does that generally conversation going outside of Walmart?

W. Alexander Holmes -- Chairman & Chief Executive Officer

No. Generally speaking I think it's gone quite well. I think that the larger agents I would say that the commissions associated with those have been very consistent by market. So around the world I don't think those have changed a tremendous amount. And now the CVS renewal was great. The Walmart renewal was great. So no concerns from a cost perspective on either of those and I think we're going to have some good advantage to grow both those businesses going forward which is nice. I think the rest of the world I would say when we talk about commission rates being a little more challenged than maybe some incentives. That's largely outside of the U.S. in the nonexclusive market and then it's in the small mom-and-pop U.S. retail and then the European retail space where competing for share of mind from the agent is more aggressive and that's where we have seen commissions go up or we've kind of had normalized commissions with what we call incentives on top of that for particular corridors or particular amounts of business where we'll pay incremental for those and that's pretty standard in trying to keep up with some of the smaller niche competitors who tend to focus on high commissions to drive share of mind at the point of sale.

Tien-Tsin Huang -- JP Morgan -- Analyst

Any other major renewals to watch in the short term?

W. Alexander Holmes -- Chairman & Chief Executive Officer

Right now we have I think 9 out of 10 of our top agents are renewed through at least early '21. So we're always kind of working on one or the other but I think that's good to see. And we actually have I think a pretty good pipeline of agents that we're kind of finalizing contracts with which we hopefully will be putting press releases out in the coming weeks which will be exciting. And then we have a couple in the hopper that if we can get signed and brought on board I think it will be -- will just be awesome for us in a number of markets around the world. So hopefully I'll be able to share that with you in the coming weeks in some press releases and that would bode well for continuing growth next year.

Tien-Tsin Huang -- JP Morgan -- Analyst

That's great. So last quick one just on the opex side not a revenue question here not looking for '20 guidance either. Just line of sight into opex? And is there any potential here for even more savings. I know you're doing a lot of hard work here to get Visa Direct integrated Ripple work before the savings just to work I think on the tech side plus everything else you're talking about? I mean do you see relief from some of that work? Or is now -- is that more the new normal with your tech spending?

Larry Angelilli -- Chief Financial Officer

No I think we're going to be able to continue to reduce our operating expenses even sequentially. We think in 2020 there'll be an opportunity partly due to continued improvements in the user experience and just the reduction in some of the drag that usually comes with phone calls etc. And then also as we reposition the company to more of a consumer-direct orientation we think that there's additional cost savings there too. So we can't give an order of magnitude but we think there's still room to go on reducing dollars on a sequential basis for opex. And then one other thing just well I'm still on the record with everybody. Just a refinement to a previously asked question about a payment-in-kind interest. One of the things I forgot to mention part of the noncash interest expenses and amortization of our upfront cost which is the normal kind of thing that the way we account for any kind of transaction. So about 2/3 of it actually is payment-in-kind and another 1/3 of it is the amortization of the upfronts just a clarification.

Operator

And that does conclude today's question-and-answer session. I'll turn the conference back over to management for any closing remarks.

W. Alexander Holmes -- Chairman & Chief Executive Officer

Great. Thank you. No I appreciate as always everyone's interest in the company. And we look forward to following up with you in the next couple of weeks. So thank you very much as always.

Operator

[Operator Closing Remarks]

Duration: 62 minutes

Call participants:

Wendi Schlarb -- Head of Corporate Communication

W. Alexander Holmes -- Chairman & Chief Executive Officer

Larry Angelilli -- Chief Financial Officer

Ramsey El-Assal -- Barclays -- Analyst

Kartik Mehta -- Northcoast Research -- Analyst

Bob Napoli -- William Blair -- Analyst

Rayna Kumar -- Evercore ISI -- Analyst

David Scharf -- JMP Securities -- Analyst

Mike Grondahl -- Northland Securities -- Analyst

Tien-Tsin Huang -- JP Morgan -- Analyst

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