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MoneyGram International (NASDAQ:MGI)
Q4 2020 Earnings Call
Feb 22, 2021, 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. fourth-quarter 2020 earnings release conference call. Today's conference is being recorded. [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

Good morning, and thank you for joining us. We also appreciate your patience and flexibility to reschedule this call today, given the unprecedented winter storm that caused power outages and disrupted our internet last week. On the call with me, you have Alex Holmes, MoneyGram chairman and chief executive officer; Larry Angelilli, chief financial officer; and Kamila Chytil, chief operating officer and leader of the company's Digital Business. 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 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 provided should not be considered as a substitute for or superior to those provided in accordance with GAAP. They are included as additional clarification items to aid investors in further understanding the company's performance and in addition to the impact that these items and events had on 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 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 SEC. We do not undertake any duty to provide any -- to provide an update to any forward-looking statement.

And with that, I'll turn the call over to you, Alex.

Alex Holmes -- Chairman and Chief Executive Officer

Great. Thanks, Stephen, and good morning, everyone. 2020 was truly a remarkable year amid the historic backdrop of this terrible ongoing global pandemic. Looking back to March, the results we're about to discuss seemed almost impossible to imagine.

But our inspiring and resilient customers, combined with the tireless dedication of our employees, helped MoneyGram deliver fourth-quarter and full-year results to demonstrate the sustaining strength of our digital transformation. When government shutdowns went into effect in the first quarter of 2020, we saw much of our business come to a halt. But we were able to turn things around by shifting our operational focus to our digital business, nimbly managing our expenses, and creatively working to support our retail partners and locations around the world. Quite remarkably, despite concerns of forecasted drop-off in remittances by the World Bank and despite the many hardships caused by the pandemic, we found that our customers actually spent more money home in 2020 than ever before.

This is truly a testament to their dedication to their families, friends, and loved ones. Throughout the year, we continue to gain momentum, delivering double-digit money transfer transaction growth in both the third and fourth quarters and also achieving a record-breaking December, reporting the largest number of digital customers and transactions ever in a given month. Our full-year results also exceeded expectations, and we were able to post 5% year-over-year money transfer growth despite the sharp declines in the spring from the onset of the pandemic. Full-year transaction growth is driven by year-over-year MoneyGram Online cross-border digital transaction growth of 152%, along with the recovery of our retail business in many markets.

I'm also extremely pleased that we delivered four consecutive quarters of adjusted EBITDA growth, culminating a full-year adjusted EBITDA growth of 13%. This impressive growth was driven by our return to money transfer revenue growth, strong margins in our digital business, and our ongoing efficiency and cost reduction initiatives. Turning to Slide 4. I can confidently say that the continued execution of our strategy, along with the strength of our digital transformation, have put the company in a position to win.

Our financial results strongly correlate to the successful execution of our strategy, as we strive to deliver a differentiated customer experience, scale the digital business and be the preferred partner for cross-border payments. Some incredible highlights really helped to illustrate our success. These include over 80% MoneyGram Online customer retention rate; a 152% year-over-year increase in cross-border MoneyGram Online transactions, along with a 27% year-over-year increase in total cross-border principals sent through our money transfer rails in the fourth quarter. On Slide 5, our strong financial results were also supported by the continued stabilization of our retail business.

Even against the backdrop of the COVID-19 pandemic and shelter-in-place policies, our sales force continued to win. The team did a great job in 2020 managing through the crisis to drive productivity and same-store sales growth in major send markets. In addition, as you know, over the past several years, we focused on overhauling major receive markets and improving corresponding corridors through the expansion of both digital and retail partnerships. It's through these combined efforts that we're able to pivot quickly and return to revenue growth.

To that end, I continue to be pleased with our execution around the world. While the impacts of the pandemic continued to be felt in many markets, in others, we have seen a return to growth. In the fourth quarter, our U.S. business reported double-digit growth rates for sends to Mexico and the Northern triangle.

In Europe, our retail business continued to excel, posting year-over-year double-digit spend growth rate. And in parts of the Middle East and Asia, we also saw a strong recovery and a return to growth for key markets. Over the past year, our team has also made excellent progress by signing and renewing our top 20 priority partnerships in major markets. This enabled the company to strengthen its position in North America and Asia Pacific regions with long-term renewals of Canada Post, SBI in Japan as well as Walmart here in the United States.

While Walmart recently announced plans to further expand their marketplace, we continue to be pleased with our performance and service at Walmart. We had an excellent 2020 and feel uniquely positioned to continue to compete. We've worked tirelessly over the past few years to execute our digital transformation and build an agile organization that's ready to scale. We have a unique, high-quality, and efficient network with real-time money transfer capability.

We have over 410,000 retail locations across 200 countries and territories, with almost half of those countries now digitized, providing consumers unmatched ability to send and receive money. This is an incredibly valuable asset and one that third parties around the world are increasingly seeking to access. As we look to expand our offering and enter the fast-growing payments-as-a-service market, our modern API-driven infrastructure can now be more easily monetized. We think this is a great opportunity.

And in the coming months, we will have some exciting announcements to share in this area. And with that, I'll turn the call over to Kamila to provide additional details on the company's significant digital progress.

Kamila Chytil -- Chief Operating Officer

Thanks, Alex. The importance of delivering a differentiated customer experience is so critical in today's world, where companies are increasingly interacting directly with consumers and consumers can easily share their experiences with others. As in any fintech, there is tremendous value in our large and growing customer base, and we believe that our unique customer experience is key to driving this growth. One of the key metrics we focus on, as an organization, is customer retention rates.

We believe this is the best indicator of our overall customer experience, and MoneyGram Online now has an impressive customer retention rate of over 80%. Our leading loyalty program is also a significant contributor to high customer retention rates. Enrollments grew this past year across both digital, and retail customers, and loyalty members have a 30% higher productivity rate than the average nonmember. Our 4.8 star app rating with over 160,000 reviews, is another great data point highlighting the strength of our customer experience contributing to both customer acquisition and retention.

I'll talk about the app more shortly, but it's also important to highlight that the strength of our experience is driving an extremely high customer lifetime value. In fact, the average CLD for an app customer is about three times as high as the average retail walk-in customer. And finally, it's also important to note that we're focused on customer experience improvements across every customer touchpoint, in every part of our business, including retail. We continue to roll out enhanced PoE software, which improves both the agent and customer experience.

And our personalized communications and self-service capabilities, such as an AI chatbot, also help support a leading customer experience while driving savings that have a positive impact on EBITDA. In 2020, we captured market share because of our outstanding user experience. And we believe that as we enhance our digital marketing capabilities to introduce new customers to our brand, we will continue to capture share in this large $620 billion remittance industry. On Slide 7, you'll see a familiar view of how we're driving growth across each component of our digital business, which now accounts for 28% of all money transfer transactions, up from 16% just a year ago.

In the fourth quarter, we drove total digital transaction growth of 94% and reported record digital revenue of $57.4 million, which now puts us on an annual revenue run rate of over $200 million. This was led by MoneyGram Online, with revenue growth outpacing transaction growth, which is notable in our industry and a sharp contrast to our competitors. Digital partnerships are also a key component of that growth. We partner with leading fintechs to offer either a white label or branded solution where companies leverage our rails and global platform to instantly add services and scale to their existing offerings.

Partners around the world are increasingly seeking access to our network and we expect this will continue to be a powerful growth engine for the company. Our fourth-quarter results are the perfect example of this as transactions for our digital partnership increased an impressive 77% compared to the prior year. The second component of our digital business, sends to bank accounts and mobile wallet, has also seen tremendous growth this past year as we rapidly expanded to new markets through direct connections, Visa Direct, and other aggregators. As you've seen from our recent press release, Visa remains an incredible partner for our continued expansion.

Our recently announced partnerships with Visa and Checkout.com, which expands our Visa debit card deposit service across Europe, is another example of how we've been the first in the industry to pioneer many of these real-time connections that consumers are increasingly demanding. Our continued expansion of Visa, utilizing Visa Direct, is a critical component of our efforts to improve customer experience for providing a frictionless customer journey and real-time transfer capability. Debit cards are simple, reliable and billions of consumers have them at their fingertips. Consumers are used to buying things online using their card.

So we leverage that same, very familiar experience when they open their MoneyGram app to send money through a Visa card as opposed to having to dig up bank account information to complete the transaction. As much as it's a win for consumers, it's a win for MoneyGram as a company as well. In addition to driving high retention rates, each transaction has a low-cost basis. So in turn, it's leading to higher margins in our money transfer business.

Importantly, we delivered record numbers of transactions using the Visa Direct rail, which grew more than 650% year over year in the fourth quarter. I'm also proud to share that we started the year at 67 digitally enabled countries and that we now have a digital presence in 90 countries. Given the rapid expansion of our account deposit and mobile wallet network, that channel increased over 140% in the fourth quarter. And in some markets, that growth rate is even higher.

In India, for example, a year ago, sensitive accounts only made up 15% of all money transfers. And in the fourth quarter of 2020, an amazing 40% of transfers are sent directly to an account. That's a 287% year-over-year increase. Frankly, we've just cut off in many markets, and we have significant runway to grow and surpass competitors as we remain focused on the high-margin channel going into 2021.

And finally, the largest component of our digital business, MoneyGram Online, or MGO, our direct-to-consumer digital channel delivered 143% year-over-year cross-border transaction growth in the fourth quarter, largely due to demand for our leading app. As we turn to the next slide, I'll provide a deeper dive of this channel. Turning to Slide 8. We delivered an impressive 215% year-over-year increase in transactions through our leading app in 2020.

Our app is helping to acquire and retain customers. It continues to drive a significant increase in cross-border MGO customers. In 2020, we saw 122% increase in the monthly average number of customers using either our app or our website. This growth rate is over triple the growth rate from 2019.

We are closing the gap in downloads. And even our largest competitor is not far ahead. For example, in December, we were either the first or second company in app downloads in most of the largest digital send market. Going into 2021, we are enhancing our digital marketing effectiveness to further scale the business by efficiently targeting the right person, with the right message, at the right time.

Time and time again, we've proven that once customers try our service, they do not leave. We're winning with customers, and we're excited about the growth opportunities we built from enhancing our tactics to acquire even more customers in the year ahead. So in summary, as I look back on how far we've come in the last few years, I'm amazed and so proud of everything that we've accomplished. We are now in a digital annual revenue run rate of $200 million with incredible growth rate.

As a result, we're one of the biggest, fastest-growing fintechs in the world. We have built an incredible team that continues to exceed expectations, and I couldn't be more confident that we have the right structure in place to continue to grow the business. I wanted to take a minute and express my gratitude for all of the opportunities I have had at MoneyGram. As I move on from the payments industry, I will definitely miss this brilliant group of ambitious people, and we'll be cheering them on from the sidelines.

We have changed so much together at this company, and I know you will continue to win. Thank you for everything. I will now turn the call over to Larry to walk through our financials and outlook.

Larry Angelilli -- Chief Financial Officer

Thanks, Kamila. Well, on the surface, total revenue of $323 million for the fourth quarter appeared virtually flat to last year's fourth quarter, but there were many contrasting events that shaped that outcome. First, we have the negative impact of the Walmart Marketplace, which, as we've discussed in prior quarters, reduced foreign exchange income. This was despite our overwhelming dominance of that marketplace throughout Walmart's entire U.S.

store network. Second, investment revenue for the quarter was down 79% on a year-over-year basis to $2.6 million, which was entirely due to the zero interest rate environment brought on by the economic impact of COVID-19. We offset these impacts, however, with triple-digit growth of our digital business. And as Alex and Kamila discussed, digital transactions now make up 28% of our money transfer volume.

MGO, by itself, now represents over 21%. Even more important, the MGO site, just for the United States, became our largest single source of generating money transfer transactions in the world during the month of December. MGO's rapid growth has continued to improve the diversification of our revenues from both an agent and a geographic concentration perspective, significantly enhancing our send activity overall. MoneyGram Online has reached a size where its contribution to growth has a material impact on total revenues, resulting in 4% money transfer growth for the quarter.

In addition, we've also reached the point where transaction growth and revenue growth are closely aligned. And as Alex discussed, we have stabilized revenues in our retail business, providing further support for the money transfer business going into the new year. So taken as a whole, through rapid digital growth and the stabilization of our global walk-in business, the company's core businesses were able to completely offset the significant headwinds from Walmart and investment income in the fourth quarter of 2020. As shown on Slide 11, adjusted EBITDA on an as-reported basis was $64.6 million, an increase of $7 million or over 12% from the fourth quarter last year.

As with the third quarter, a lower U.S. dollar versus major currencies impacted adjusted EBITDA, such that it translated into a year-over-year increase of 8% on a constant currency basis. More importantly, adjusted EBITDA margin was 20% for Q4, up from approximately 18% a year ago. EBITDA was $60.2 million for the quarter, up 44% from the fourth quarter last year, which highlights the conversion of EBITDA and adjusted EBITDA in this quarter.

These improvements in the quality of earnings were achieved due to continued active management of overhead expenses, the digital transformation efficiencies that we've discussed, and margin-accretive digital transaction growth. The pandemic created the opportunity to rapidly test and learn new approaches to running the business more efficiently, and these learnings have created savings that will be relevant long after the pandemic subsides. As part of these adjustments, we also proactively implemented a restructuring initiative in the first quarter of 2021, which should generate annual run rate savings of approximately $8 million -- $18 million. Additionally, the impact on EBITDA from our Ripple incentives was flat to the fourth quarter last year, so it was not a factor in reducing expenses in the fourth quarter of 2020.

Free cash flow of approximately $19 million was roughly flat to the fourth quarter last year, primarily due to the cyclical increase in signing bonus payments, which reflected certain key agent renewals as well as the success, that Alex described, in the revival of our traditional retail business throughout the world. The ultimate impact from the earnings and cash flow in the fourth quarter was a continuation of MoneyGram's improving credit metrics and improving liquidity. The company reported $196 million in cash and cash equivalents at December 31, up from $163 million at the quarter end of September 30. We are continuing to build our cash balance in anticipation of the final payment due to the Department of Justice upon exiting the DPA in May of 2021.

We also completed another quarter where we elected not to defer interest expense underpayment and time provisions of our credit agreement, and we continue to strengthen the cushion on our financial covenants on all tranches of our debt. MoneyGram finished the year in substantially better health than when it started, despite the challenges of COVID, an increasingly competitive marketplace, higher interest expenses, and the impact of a weakened global economy. And finally, we're providing our outlook for the first quarter of 2021. We expect that many of the factors influencing our fourth quarter will remain in place for the first quarter.

We expect interest rates on our invested cash to remain at their current low levels, and therefore, anticipate $2.3 million in investment revenue versus $10 million for the first quarter last year. Also, last year, Walmart was still in the launch phase of their marketplace, but 2021 will see the full impact. Our outlook also takes into consideration that the first quarter is usually our lowest quarter of the year for revenue and EBITDA. In addition, we are not planning for any Ripple incentives in the first quarter.

We continue to monitor the filing of that suit, we have suspended trading on the Ripple platform. As we've stated in the past, this has no impact on our customers nor on our ongoing cross-border transaction capabilities. However, it will be a significant difference when compared to the first quarter of 2021. In the first quarter of last year, MoneyGram generated a net EBITDA benefit of $12.1 million from the Ripple market development fees.

The combined impact of Ripple and lower investment returns create a $17 million EBITDA headwind, which should be offset by our digital business with continuing triple-digit growth rates and the improved diversification and growth prospects of the money transfer business overall. These offsetting factors, as illustrated on Slide 12, support our outlook for total revenue of approximately $300 million and adjusted EBITDA of approximately $50 million for the first quarter of 2021. Looking forward to 2021, we also anticipate improving the disclosure regarding MoneyGram Online, or MGO. Given its continuing rapid growth, its increasing prominence, and the financial metrics of MoneyGram, we are developing the capability to report MGO as its own segment in our quarterly SEC disclosure.

We expect to have this completed in the first half of 2021. And with that, I'll turn the call back over to Alex.

Alex Holmes -- Chairman and Chief Executive Officer

All right. Thanks, Larry. Before closing, I would also like to echo my thanks to Kamila. She's been an amazing leader here at MoneyGram for almost six years and has made an indelible mark on our organization.

While you will certainly be missed, I'm thankful for the wonderful team that you've built. And I know that they are all as excited for 2021 as I am. We wish you all the success in the world. Now speaking of '21, it will certainly be another year of change in our money transfer business, but one that we think will be great as we continue on our digital transformation journey.

We've built a customer-centric tech-driven organization that has positioned us to more quickly adapt to the changing dynamics of this ever-evolving landscape. As evidenced by our impressive results, our transformation has enabled us to become monumentally more efficient and become more customer-focused, and less reliant on large agent partners as we diversify our revenue streams. We've built a strong compliance organization as well. And even as our DPA comes to an end in May, we will maintain the strongest standards in the industry to ensure we continue to protect our customers.

While the pandemic is far from over, our core business is sound. Every day, we see our online business accelerate, while we continue to negotiate new and exciting opportunities that will enable us to keep pushing the boundaries of the cross-border payments market. As '21 begins, we're already off to a strong start. In January, we posted 137% cross-border growth for MoneyGram Online, driving total money transfer transaction growth of 11%.

While this growth has been somewhat tempered in February, particularly by last week's winter storms, we are certainly pleased with the continued progress. As Larry highlighted, '21 will not be without its challenges. However, we will continue to leverage the momentum in our business and push to overcome these obstacles. We're confident we'll emerge in this pandemic and this year stronger than ever.

I'd like to conclude by once again thanking our incredible customers and, of course, our wonderful, dedicated, and loyal employees. And with that, I'll turn the call over to the operator and get ready for your questions. Thank you.

Questions & Answers:


Operator

Thank you. [Operator instructions] And we will take our first question from Ramsey El-Assal from Barclays.

Ramsey El-Assal -- Barclays -- Analyst

I wanted to ask for the -- some thoughts on Ripple and how you kind of came now to make the decision to move off the platform? And also, any thoughts on how permanent that move would be? Should we just sort of presume it's most likely that, that will not flow back into later quarters? Or is it -- are you in a sort of wait-and-see phase? Any color around that topic would be helpful.

Alex Holmes -- Chairman and Chief Executive Officer

Yeah, sure. Thanks, Ramsey, for the question. Yeah, we have been doing, obviously, quite a lot with -- with Ripple on the ODL platform, really over the past 18 months leading into December. In December, as we kind of got into early December, we paused our activities on the ODL platform and really just have not found a way to get back into that yet, given a variety of different factors.

One has been some of the changes and decisions that the exchanges have made in the U.S. and others obviously concern the question that continues to be open around that case. I certainly hope that they're successful in their efforts with the SEC and that things go in the direction that they want. I would say that right now, we're pausing those activities.

Just more for, I think, with the abundance of caution really than with any other concerns about it at the moment. And that's pretty much where we are. I don't think that we're saying that it's a permanent decision. I think that will take some time to sort through, and it's just one of those interesting situations, I think, which have presented itself and made it very difficult to continue on at this point in time.

Ramsey El-Assal -- Barclays -- Analyst

OK. And I also wanted to ask about -- Kamila had some interesting comments on just digital partnerships. And just could you give us a little color on the pipeline there, the types of partners that you're evaluating, and what we should sort of expect to the degree which you can share kind of going forward, at least this year from that effort?

Kamila Chytil -- Chief Operating Officer

Sure, thanks. Thanks, Ramsey. It's definitely a focus of all of our sales leaders around the world. Digital partnerships are an excellent opportunity for MoneyGram, but also an excellent opportunity for the fintech that we're engaging with.

They're the ones that actually control the customer acquisition and the experience, the combination of other things that they may be offering through their app and they can really focus all of their resources on those activities instead of having to worry about building out a regulatorily compliant network all around the world, with cash out, wallet and account deposit capabilities. So it's really a great symbiotic relationship for both of us. So our sales force is focused on primarily fintechs around the world, but also banks that are looking to be more digital and offer cross-border options to their customers. So that would pretty much be the two categories that we're focused on.

Ramsey El-Assal -- Barclays -- Analyst

Got it. OK, great, and best of luck to you. Thanks.

Kamila Chytil -- Chief Operating Officer

Thank you.

Operator

And we'll take our next question from Tien-Tsin Huang from J.P. Morgan.

Tien-Tsin Huang -- J.P. Morgan -- Analyst

Thanks so much. I hope everything is getting a little more back to normal here in Dallas, and Kamila, best of luck to you, definitely going to miss having you around. Since we have you on this call, I thought, I'd ask just thinking about what your comments around users and record additions in December. I'm curious if there's any change in the type of user that you're getting and the different -- or have any change in the channels that are being successful? I get a lot of questions about what type of users are coming on, especially in the U.S., but maybe the focus should be more outside the U.S.

So any additional -- anything interesting there to share?

Kamila Chytil -- Chief Operating Officer

Hi, thanks, Tien-Tsin. The users continue to be slightly different in our digital channel than our walk-ins. They do -- they are a little bit younger. They're obviously banks because the only way to fund a money transfer for MGO is via debit, credit, or bank accounts.

So, it is fundamentally a pretty different demographic than the one that I think you would traditionally associate with the money transfer demographic from a cross-border standpoint. But other than that, the main difference that I love highlighting is just how much more of a prolific spender they are. And that really has to do with the stickiness of the experience. So once they trust us and get through the registration process, they do use MoneyGram more than other providers.

We know that they have other apps in their phones. There is a series of services that allows you to monitor what other competitive apps are installed. So whenever we do that, we do notice that they pretty much have apps from all the major providers. But yet they choose MoneyGram more than they choose others, and it has to do with convenience and, obviously, pricing, and then most importantly, experience.

So I would say, in summary, the demographic is slightly different, but it's really their behavior that's different because they choose us time and time again.

Tien-Tsin Huang -- J.P. Morgan -- Analyst

Got it. That's all interesting. So my quick follow-up, just thinking about expenses for '21. Understand the Ripple comment there on pause, but a lot of commentary on Visa Direct, which I think has an advantage on funding cost.

It sounds like retail, pretty stable. Anything to comment on with -- on the expense side that could be needle moving? Would it be on the marketing side? Or is this funding cost advantage with Visa Direct, could that be a much more meaningful contributor as we look to '21?

Larry Angelilli -- Chief Financial Officer

Yeah, that's a good question. We are definitely -- from a cost increase perspective, we are definitely reinvesting back in a lot of marketing and putting a lot more into the consumer direct channel and sort of a -- lot of the social posts and other areas that are, in essence, a lot more efficient, but also more targeted toward each and every consumer. I think it goes without saying that the -- the walk-in space is becoming increasingly nonexclusive, even seeing our largest partner now going around and trying to sign up with the smaller players' agent, which I think says a lot about where nonexclusivity has gone and sort of what that means on a go-forward basis. And so I think the brand recognition continues to be important, but I think the value creation opportunity with an individual consumer and the stickiness that Kamila highlighted is much more important than branding for brand's sake and sort of the old traditional marketing route.

So we're putting some -- a lot of effort into that. We're also going through the cloud transformation process and continue that. So we're ramping up our efforts there, which is definitely a bit of a cost increase. But both of those are really critical to our future success.

We certainly are getting efficiencies out of all the changes that we made. And then yes, the more that we continue to shift the business digital and the more that the business shifts to account deposit and wallet and real-time transfers, definitely, there's more and more savings there. One of the things that Kamila highlighted, but I don't think we really completed the connection there when she's talking about the consumer, the other thing you see in the online space is a higher propensity to stay all digital, right? So when you've got repeat customers who've already gone through the authentication process on the send side, sending into bank accounts and wallet, there's a tremendous amount of savings coming through on those transactions as you would otherwise compare, I suppose, to a traditional walk-in cash business. So the other important thing, I guess, to keep in mind just on the expense front is that because of the goofy accounting treatment, as I like to say, associated with Ripple, which was treated as a -- what do we call it, a negative --

Alex Holmes -- Chairman and Chief Executive Officer

A contract expense.

Larry Angelilli -- Chief Financial Officer

Contract expense, yes, very formal. And so that will, obviously, to the extent there isn't any of that flowing through, that will be -- obviously look like -- the T&O line is artificially shifting the other direction. But I'd say outside of that, I feel like the cost plans we put in place, the efficiencies that we're getting are going to continue to benefit us as we go forward through the year.

Tien-Tsin Huang -- J.P. Morgan -- Analyst

All right. Thank you, all.

Larry Angelilli -- Chief Financial Officer

Thank you.

Operator

And we'll take our next question from David Scharf from JMP Securities.

David Scharf -- JMP Securities -- Analyst

Hi, thank you. Good morning, everybody, and hope you are recovering over there. It looks like at least from what I hear the weather at least is back to normal in terms of temperature in Dallas. Hey, I figured there are always going to be a ton of questions on the digital transformation, so I'm going to ask about something I probably haven't asked probably in a decade, which is the official check business investment revenue.

I mean, given there's effectively, barely any revenue in this rate environment, and while the rate environment may not last forever, can you remind us how much of a fixed cost structure is associated with maintaining that business and whether even at a slightly higher run rate of revenue, if there's any thought to perhaps discontinuing that?

Larry Angelilli -- Chief Financial Officer

Well, it's a question we haven't had in a long time.

David Scharf -- JMP Securities -- Analyst

Actually.

Larry Angelilli -- Chief Financial Officer

The -- the overheads are really low on that business. And also the commission structure on it also is variable when interest rates are extremely low, and they become even lower proportionately. So it doesn't lose money. It doesn't require much capital.

It really -- it's still contributing. It's just at a significantly lower rate. So it's not something that would benefit the company in the short run in terms of disposing of it. I think it's an interesting business.

We don't have really any meaningful competition. It's low capital requirements and it's accretive. So that's why we keep it, and that's why we like it. But I think any kind of rise in rates should start to normalize the income from that.

But I think that's -- that is the way we're looking at it.

David Scharf -- JMP Securities -- Analyst

Got it. Got it. No, no, it's just been a long time since really any of us have kind of paid much attention to it. But it --

Larry Angelilli -- Chief Financial Officer

Yeah, and ironically, rates are rising at this time last year, right, before COVID, rates were increasing. So the comps are tough, too. But it's --

David Scharf -- JMP Securities -- Analyst

Hey, a couple of just quick follow-ups. One, I'm just curious, when the DPA kind of expires, you sort of exit that in May. Are any -- do you anticipate any kind of practices changing? Or -- I mean, you've already anniversaried, obviously the initial headwinds from when you had to engage in certain practices that --that seem to be more restrictive than some other competitors. But when May rolls along, is it pretty much business as usual going forward?

Alex Holmes -- Chairman and Chief Executive Officer

Yeah, it's a great question. I was actually reflecting back on just kind of how remarkable and impactful all the DPA activity has been. I mean it's going to be eight and a half plus years. I was thinking that vast majority of our employees here have never known sort of life of how to monitor the -- Andy, our Chief compliance officer, I think, has one of the toughest jobs in the industry, and if not in any industry.

And he's never been able to operate his organization without someone ask him every 10 minutes why do you make that decision sort of thing. So it will be very different from an operational perspective. I would say from a compliance perspective, it's going to be business as usual. I think we have actually tremendously benefited from all the efforts and put in place what I think is the leading compliance program in the industry for a variety of reasons.

I mean -- and that's kind of -- doesn't directly correlate, but does flow a little bit into all the online authentication and all the risk management procedures and everything else that we have to take on as an organization. So the world of regulatory compliance is not getting any easier. The risk to consumers from fraud and scam in any form has definitely increased. And I would say that the impacts on our particular industry and our business and our company, in particular, has lessened and come down.

I mean I think our ID standards lead anybody else's. I think our customer data collection standards lead anybody else right now. And we know exactly what's going on with our business, and we're going to continue to leverage that. One of the big questions from calls like this, a number of years ago, is how are you going to grow against the backdrop of higher compliance standards.

I think our two largest competitors basically said that we couldn't and that we were done and finished, and I think we've proven that to be wrong. And that those compliance standards really need to be out there, and we're going to continue to push for them. So look, I anticipate our cash flow cost run rate for DPA oversight and monitor expenses will drop. Obviously, the investments that we've made have enabled us to kind of catch up and then push forward and put us in a very strong position.

And so the need to perpetually invest excess amount into that area can come down and put us on a more normalized run rate of standard investment and continuing to maintain. So no, I feel very good about that. And yes, it will be good and exciting for the organization to be in a different position operationally, and that should benefit us as we continue to grow and expand around the world.

David Scharf -- JMP Securities -- Analyst

Got it. Got it. Hey, Alex, just one just quick clarification on Ripple. I think in your comments when discussing the temporary halting of trading on their platform, in addition to Ripple's kind of separate investigation, I thought you would reference something about some changes by exchanges in the U.S.

that were also limiting activity. Can you clarify that? I may have just typed it incorrectly here.

Alex Holmes -- Chairman and Chief Executive Officer

Yes. No, that's -- that's correct. I mean, I think one of the exchanges, for example, coin-based, right, you can't trade XRP on the exchange anymore. One of the things that you have to do to make the ODL flows work is actually put your fiat currency through an exchange, right? I mean, you have to be able to exchange the XRP coin back into fiat on one end or the other.

So it's not -- I mean, it's not every exchange. It's not a complete withdrawal. But in a couple of places where we had those relationships, they've changed their policies around it. And it's really for the same thing, right? I mean, no one wants to inadvertently get caught up in a question that the SEC has raised around, is it a security or not? I don't have an answer to that question.

Only they know that they being the government. And we'll see where this plays out. But it's definitely a difficult area when you start getting into the questions of what can and can't you do when there's open questions like that, right? I mean, the SEC has their allegations, they've yet to be proven. And I think Ripple, as they've stated publicly, they believe they have strong arguments there, right? So that being said, we've had a great relationship with Ripple, and it would be great to continue to partner with them.

I think what they're trying to do is definitely unique. I think they have a good team over there, and they're definitely pushing for changing the payment landscape, which is extremely admirable and something that we'd be exciting to participate in. But I've certainly had, along with everyone around this table, we've certainly had our share of challenges with government regulators in a number of countries around the world. And when that stuff happens, it's not any fun.

So we're definitely supportive of Ripple's efforts, but at the same time, we have to do what's right for the organization.

David Scharf -- JMP Securities -- Analyst

Right, right. Yeah, thanks for clarifying.

Operator

OK. We'll take our next question from Kartik Mehta from Northcoast Research.

Kartik Mehta -- Northcoast Research -- Analyst

Hey, good morning. Maybe Kamila or Alex, the $64,000 question is, how much or what percentage of that transactions that have gone digital will remain digital versus go back to retail? And I know this is a difficult question, but any perspective you might have today versus when COVID-19 kind of started and this trend started as to what you think will remain digital versus going back to retail?

Alex Holmes -- Chairman and Chief Executive Officer

Yeah, I mean I'll go out on a limb and say I think 100% of them will remain digital. And I'm not really concerned about being off on that prediction by very much because, I mean, if it's 95%, I mean, it's close enough. It's going to be the vast majority for sure. The customer base just continues to be very different.

The repeat customer utilization is very different and the crossover is minimal. So I think the growth in that online space is definitely reflective of a different consumer in different demographic. And I think we're seeing that shift to digital in a variety of industries, and ours being one of them, and I think that's going to definitely continue and continue at pace. So we're excited about that.

I don't know if you want to add.

Kamila Chytil -- Chief Operating Officer

Yes. I support Alex's view, and it's pretty evident in the data, Kartik, because the retention rate is so strong with MoneyGram Online. Its continuous increases in transactions are driven by repeat customers. Many of those repeat customers obviously were acquired in 2020 because of the shutdowns of cash.

And it's one of those things that perhaps they didn't have the motivation to transition to online in the past. But once they had to, they're certainly going to remain. Pricing is better in our digital, the experience is better. And then obviously, you have that convenience and the fact that you can do one-click transfers and repeat transactions once you've actually registered with us.

So it really would be an unusual scenario for somebody to abandon that and go back to standing in line to send the transfer. Because remember, the receive method doesn't change. So even if they want to spend to cash as they have in the past, they can still do that and continue to do that through the digital app experience. So it really would be an unusual circumstance for somebody to go back to the physical space.

Good question.

Kartik Mehta -- Northcoast Research -- Analyst

So -- and then just on pricing, both on the retail side and the digital side, obviously, we've seen a couple of quarters here where pricing recently has gotten very aggressive. I'd be interested, Alex, your perspective on what you think pricing. What your expectations for pricing are for 2021?

Alex Holmes -- Chairman and Chief Executive Officer

Yeah. I mean, I think we've had some discussions on this over the years, Kartik. I mean, I guess my perspective continues to be the same. It's been a long while since I've had a conversation with anyone on the sales team anywhere that called me and said, "Hey, we can raise prices because competition is bringing their prices up." In fact, I think against the backdrop of comments about a stable pricing environment and all these types of things, I still continue to not understand what that really means.

I'd say it continues to be an aggressive price environment. I mean, when you start talking about walk-in agents going on exclusive, that just continues to drive pricing changes. When you talk about new competitors in the online space and growing competitive dynamic, it generally is about leading with price. And people are doing it very differently, right? I mean, I think you've got companies like TransferWise, which I guess not changed their name.

But basically saying that they're cheaper because they're not charging FX. Well, they're very expensive on fee, but that's not kind of what they lead with. In other places, we're seeing low prices on fee, but then FX rates, which are competitive, but now we're kind of seeing in the online space, in particular, low fees and low FX points. And then the walk-in retail space, when you're talking about sends to Mexico and Northern triangle, I mean we see a lot of our competitors, particularly the more niche-oriented ones, going with negative FX rates and other things as well.

So it's very competitive, which I think means competitive pricing as well. And -- but on the flip side, it doesn't really bother me. I mean it's not like we're building in like massive reductions in revenue or concerns about that because of the competitive nature of it. I think it is, in that sense, just it is shifting around and it's sort of just different corridors and different areas.

But I think it's just a competitive nature of our business is more how I look at it. And I think it's just something that we need to anticipate. And hopefully, the message that we've tried to resonate around this idea that we need to continue to look at efficiencies and how do you drive more throughput in your network and particularly in the online space where you can scale so much quicker and easier because you take down the incremental cost, then it's easier to do that from a competitive standpoint in that lower price environment, which is really the way we designed our entire online platform, which is why I think margins are so strong despite how competitive it is. So that's pretty exciting, and we've taken that methodology and really pushed it down into the walk-in space as well.

And we continue to, I think, benefit from that, and we'll benefit from that as we go forward.

Kartik Mehta -- Northcoast Research -- Analyst

So I guess the bottom line -- I'm sorry, go ahead.

Kamila Chytil -- Chief Operating Officer

I was just going to say, take a look at any other company that competes on customer experience, right? I mean, pricing is certainly a factor, but it's not the only factor. Many things on Amazon are much more expensive than they are in the walk-in space, but yet people choose the convenience and the actual improved user experience. So again, pricing, like in any industry, is absolutely key and important. But it's not the only factor and people will focus on what is most convenient for them at the end of the day.

Kartik Mehta -- Northcoast Research -- Analyst

Thank you very much. I appreciate it.

Operator

And we have a question from Rob Napoli from William Blair.

Rob Napoli -- William Blair -- Analyst

Thank you, and good morning. I guess, Kamila, good luck to you. I didn't realize that you were leaving. You're kind of leaving in the middle of the movie.

It seems that, Alex, Kamila has been important in driving this digital business. What are the operational -- what adjustments are you making, who is taking some of those responsibilities?

Alex Holmes -- Chairman and Chief Executive Officer

Yeah. It's a great question, Bob. Yeah. Sorry, you missed it.

We put out an 8-K on a few number of weeks back, right? Yes, I guess, mid-January or something. So apologies if you missed that. But yes, no, look, I mean, I think we've been fortunate that we've been able to consolidate some of our operational efforts under a very strong COO. And I think that it's really the combination of those that have created the uniqueness around that.

But when you peel back the layers, we've got very strong operational-oriented folks. We've got very strong marketing and consumer-oriented leadership as well, and we've got really strong IP and product performers as well. So I'm not really concerned about the ongoing operational aspect of the business. There's definitely a difference in how decisions seem to be made, and you have to transition and pivot.

We're currently searching to see if there's a replacement or do we bring in some different talent for different reasons and focus on the business a little bit differently. So I think those create a little bit of an opportunity to think about how we want to be organized, which is always good to be able to do as well. At the end of the day, maybe a little-known secret, but much of our digital success has really been because we run it as a group effort. It's really kind of what we call this task force-oriented mentality around it.

We don't have one individual person that's really making every decision about the digital business. The world is too big, and I think there's too many factors that go into it, whether that's the people looking at the experience side of the interaction, whether that's things happening in foreign markets, pricing, I mean, all that needs to roll up from all over the organization. And it's very dynamic. And so I would say that's one of the best things that Kamila actually did was put together a task force mentality around that in an organization that's really built on a group of individuals getting together frequently to help drive that decision-making process.

And so as she steps away, that process will continue and others will pick up where she left off. So I feel very, very good about that. I don't really feel like we're in a position where we've had one mastermind behind digital, and we need to replace that person. So we don't have that issue, and that's exciting for us.

At the same time, you never like to lose really good people. But then again, I think really good people are often destined to go do more different and exciting things. And her opportunity is great, so we're happy about that. But yes, so anyway, we're searching for various people.

I think it will give us an opportunity to bring in some new talent in different ways, and we'll go from there.

Rob Napoli -- William Blair -- Analyst

Growth, 79% in the fourth quarter. And I think you said outlook, the total money transfer business grew 11% in January. What is the right growth rate for the digital business over the next three to five years? So obviously, you have some tough comps coming in '21, but is this a 30%-plus growth business over the next three to five years?

Alex Holmes -- Chairman and Chief Executive Officer

On the digital side?

Larry Angelilli -- Chief Financial Officer

Yes, I would think so.

Rob Napoli -- William Blair -- Analyst

Yes, the digital side.

Larry Angelilli -- Chief Financial Officer

Yeah, yes, sir.

Rob Napoli -- William Blair -- Analyst

OK. And retail has bottomed out? Retail should grow or be flat? Yeah.

Alex Holmes -- Chairman and Chief Executive Officer

No, I don't think the retail bottomed out. Yeah. Look, I mean, I think that there's challenges in the walk-in space, and I think that we're going to continue to see those challenges in a number of markets. But we do have some opportunity to change and pivot that market orientation a little bit and think about how we utilize the network a little bit differently as well.

So we're looking at some as a service capabilities, some white-label capabilities then some other things that will enable us to continue to utilize the network in a variety of ways. I think the balancing act is going to be around what's the propensity of consumers to continue to want to walk into the locations to send cash on the counter, with the sort of digital revolution. And I guess, evolution of just general marketplaces around the world anyway, particularly in large send regions, right? I mean, if you think about the orientation of the send business, I mean, a lot of it is North America-based. A lot of it is Europe, a lot of it's Middle East.

And then you've got several areas across Asia, where -- even down into Australia, right, which is becoming very digitized and very bank-oriented, very payments-oriented landscapes. And so that drive toward sending, originating from digital platforms, I think it's just going to continue to grow. Cash on the received side is a very different conversation and one that needs to be there. So I think that the walk-in business is -- or retail or whatever you want to call it, I think will be there for a very, very long time.

I just think the growth rates are going to fluctuate by region. And I think most of the regulatory landscape, I'd say most of the cost and the expense around that, is pushing even those classes of trade toward how do I sort of compete in the future and what does the future look like from a digital perspective. And that's a lot of what we're seeing as well. And so I think that will continue.

And so it really is hard to sort of, I guess, prognosticate exactly what that will look like three or five years from now. But certainly, in the near future, we're expecting flat to positive growth in the walk-in space and then the digital business driving the bulk of the opportunity.

Rob Napoli -- William Blair -- Analyst

Thank you. Appreciate it.

Alex Holmes -- Chairman and Chief Executive Officer

Thanks, Rob.

Operator

And our last question comes from Mike Grondahl from Northland Securities.

Alex Holmes -- Chairman and Chief Executive Officer

Excellent.

Mike Grondahl -- Northland Securities -- Analyst

Yeah. Thanks, guys. I am glad it's warming up a little bit for you. So two questions for me.

The first on Ripple. I kind of thought that was a multiyear contract and the development fees were sort of earned over those years and not necessarily tied to volume. So by pausing in the first quarter with Ripple, do you lose some of the finite development fees you were kind to do, or are they just delayed? One, if you could clarify that? And then secondly, if the DPA gets lifted in May, like I think most things that will because of how strong the compliance has gotten and how low the fraud has gotten, kind of where is your head on refing the debt these days? And kind of how are you thinking about that?

Alex Holmes -- Chairman and Chief Executive Officer

Yeah. Thanks, Mike. Good -- both good questions. Yes, back on Ripple, no.

It was, and is effectively a contract oriented with growth. It is a multiyear contract, and there is time left on that contract. And it really is around partnership, right? So it's based on countries and markets and volume and a variety of things that drive those incentives. So no, there is no loss of those incentives, and those still exist.

And so it's really just more of a delay. And if and when we were able to reengage, then they're there to do. And obviously, there is ongoing dialogue with Ripple, just in terms of, is there something we can do and what is it and where and how do we do those types of things. So those conversations will continue.

And again, just reemphasizing the point, we're talking about not planning for anything in the first quarter. We really haven't commented beyond that at this point in time as well. And then on the debt refi, yes. I mean, there's always a cost-benefit analysis associated with that, I'll let Larry opine on what the opportunity could be there.

But certainly, anything that could lower interest expenses, generally positive as far as I was concerned.

Larry Angelilli -- Chief Financial Officer

Yeah. I mean, it's definitely part of our strategy for this year. We wanted to get through the year-end, have those results. And we also have the DPA expiring in May.

And I think those two things combined should put us in a position to begin a refinancing. But I don't think it will happen before May, but definitely a high priority considering where the cost of funds is, especially. So it's on the -- it's on the agenda for this year.

Operator

And we have no further questions in the queue at this time. I would like to turn the conference back over to our speakers for any concluding remarks.

Alex Holmes -- Chairman and Chief Executive Officer

Great. Thank you. It's been a good call, good start to the year. Appreciate everyone's time and interest, and look forward to catching up with everyone in the coming days and weeks.

Thanks.

Operator

[Operator signoff]

Duration: 69 minutes

Call participants:

Stephen Reiff -- Head of Corporate Communications

Alex Holmes -- Chairman and Chief Executive Officer

Kamila Chytil -- Chief Operating Officer

Larry Angelilli -- Chief Financial Officer

Ramsey El-Assal -- Barclays -- Analyst

Tien-Tsin Huang -- J.P. Morgan -- Analyst

Tien-tsin Huang -- J.P. Morgan -- Analyst

David Scharf -- JMP Securities -- Analyst

Kartik Mehta -- Northcoast Research -- Analyst

Rob Napoli -- William Blair -- Analyst

Mike Grondahl -- Northland Securities -- Analyst

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