Using the mic. There we go. So yeah, Kent Toskey, US Payments Analyst at Autonomous Research. I'm filling in for Josh Levin, who couldn't be here today, but he covers the remittance space for us. And we're really excited to have Western Union here with us at our 41st Strategic Decisions Conference. We're thrilled to welcome Devin McGranahan for the fourth year in a row. Devin joined Western Union as the company CEO in late 2021 after spending five years at Pfizer. Prior to that, he spent over 20 years at McKinsey, including 10 years as a senior partner. Devin, welcome. Thanks for doing this. Good to see you.
Kent, it's great to see you. Thanks for having us.
Yeah, looking forward to the conversation, and thanks for everyone in the audience for attending. Just, I guess, a couple of housekeeping items. We'll do a fireside chat, but if you have questions for Devin, feel free to submit those and we'll weave those in. I guess, Devin, maybe to start off, your Evolve 2025 strategy has helped transform Western Union from, you know, a declining business to one with positive growth, right? As you approach the final year of the strategy, what do you see as the most critical achievement so far and what remains to be accomplished?
Thanks, Kent. We've done two or three things, which I think are foundational in our what we will talk about as we kind of approach the end of this planning phase and move to the next one. First, outside of the Americas, and we'll, I'm sure, get to the political situation and the impact on, remittances in, the Americas, particularly in North America, we've largely stabilized and in much of the rest of the world, turned our retail business into a growing asset. As you saw in the first quarter, our non-Americas business in general was growing 10% plus. In many cases, that was on a stable to growing retail basis. The strength of our retail basis is now in Europe, which if you'd asked somebody five years ago that we'd have a growing retail business in Europe, no one would have believed that.
We have a high single-digit transaction business with mid-single-digit revenue growth, in our second-largest retail business in the world. I think the foundational premise of Evolve 2025, which, you know, had some skepticism from markets who had watched our company for a long time, was, could you really stabilize the retail business, which in your model and our model, if retail becomes stable, then the additive benefit of our digital business, which I'll get to in a second, can actually propel the whole company to positive growth. If retail continues to shrink, then the additive benefit is much less. That stability in retail is really, really important.
The second is we've now had eight quarters of double-digit transaction growth and approaching high single-digit revenue growth, in our digital business as we've kind of right-sized that value proposition, got very competitive from a pricing and an experience standpoint, and focused on some very large and growing but very competitive corridors, where we've seen real strength in our ability to drive that business. Those two foundational elements, we think are the core of the platform going forward.
No, it's, it's I think we were getting to the same math, right, where retail is, you know, it's, it's, you know, almost two-thirds, I think, on a revenue basis, maybe even higher. You definitely need to stabilize that, and then you get the added benefit, on, on the branded side. I mean, you, you guys have spoken about wanting to be a globally diversified provider of everyday financial services, right, to the aspiring populations of the world. When you think about beyond, beyond remittances, what specific financial services do you believe represent the greatest opportunity for Western Union over the next three to five years?
Yeah. As you know, at the end of 2023, we recast the financial statements to include what we now call consumer services. People used to joke that we were becoming the company of other. We had to explain that other was, in fact, this strategy, which was non-remittance-based services. I do not know. I got to, and we have been seeing strong double-digit growth in those non-remittance services for the last year and a half. That includes things like our bill pay business, our foreign exchange business, our prepaid business, and in some cases, ancillary businesses like our send-a-corrections, our VAT refund, things like that. We have quietly now built in Europe a nearly $100 million business in foreign exchange services. We call it travel money. I talked about it on the last call. People traveling across borders, doing currency exchange in Western Union locations.
and so those are the kind of businesses that we think of as everyday financial services.
I mean, that segment was growing quite quickly. I think double digits. I think it slowed a little bit. How do you see the segment evolving? I guess what's your vision in terms of the contribution to overall revenue growth from that segment? I guess anything related to margins, right? The margins, I think, are running a little bit lower, but presumably they'd be higher at scale. That incremental margin is quite high in that business. Is that the right way to think about it?
Yeah. So there are two things there, right? We did see a little slowing in the first quarter. One of the businesses that's in that consumer services is our, frankly, our advertising business, right? And so, you know, obviously, with the run-up to the election and in the fourth quarter, some of that had slowed in the first quarter. We also saw and have seen a slowing in our Argentinian bill pay business, which in the short term, as the Argentinian economy kind of goes through the transformation that it's going through, there has obviously been economic pressure on day-to-day citizens, which affects our bill pay business. As that stabilizes, we actually think a stronger, better positioned, less inflationary business in Argentina will be good for our bill pay business. Those two transitions you saw in the first quarter. Margins have been getting better.
As you know, building any new business requires investment. And so we've been investing in the consumer services businesses. We believe that all of the businesses that we're building have a revenue and margin profile that looks very similar to our remittance businesses and in some cases have better revenue and in a few cases, even better margins to your point when you get to run rate and you get to scale. We believe over time, the consumer services business will be additive both from a revenue growth standpoint and will not be a disincentive on margins.
Maybe we could touch on, on digital. Your, your Branded Digital Business, I think has been growing double digits on a transaction growth basis for at least, I think, I think it is seven or eight quarters now.
Yep.
I mean, what are some of the specific initiatives that have driven this consistent performance? And then how are you working to close the gap between transaction growth and constant currency revenue growth?
Yeah. You'll recall, I don't know, two and a half years ago, we really became aggressive with, at the time, we called it introductory offers and promotional pricing. There was a lot of concern that we were going to kind of acquire price seekers and one-time users, right? What we've actually seen, and this is what's now driving the business, is we acquired a higher quality customer when we had a market-competitive new customer offer. That group has both higher transactions per customer and higher retention. The ongoing efforts to continue to grow our business, acquire new customers, have continued. Those customers have turned out to be a higher quality customer in terms of the longevity and the transaction profile, which is what's driving our double-digit transaction growth.
The two underlying factors to that is that customer cohort has a higher percentage of people who pay out to account. The pay out to account business is a lower revenue per transaction but a slightly higher margin per transaction. It is high-quality business. Most importantly, it has a higher retentive value. Those customers stick around longer once they have entered into bank account information for their senders. Our proportion in that business is growing 30% plus. Our proportion of that business weighs on our average revenue per transaction, which is what drives the difference. At some point, it will normalize, as you see with some of our competitors who have very high pay out to account. As the pay out to cash business slowly evolves to the pay out to account business, we expect that to normalize.
Although we've historically said, you know, we, given who we are and what we're doing, that will always have some spread between transactions and revenue, a couple hundred basis points.
Okay. And I guess in terms of timeline, I guess to getting to that couple hundred basis points, are we, you know, is it a year out, couple years out? Is, you know, some time in that range?
As we've talked about, it is a proportion of how much we're growing. I have said publicly that if we can accelerate top-line transaction and revenue growth, we will live with the higher band between revenue and transactions. If top-line revenue growth slows due to political events or other things, you will see that begin to narrow. We'd like it to stay wide, and we'd like to continue to grow the top. If that doesn't happen, you will see it start to narrow.
Okay. That makes sense. You mentioned account-to-account transactions growing 30% plus. Though they have lower yields, obviously, but, you know, the margin's a little bit better. You mentioned stickier customer relationships. I mean, how do you balance this shift with maintaining the overall revenue growth of that digital business plus the overall company?
Yeah. So there are two important elements for us, right? One is there are a lot of important corridors in the world, I'll pick two just as examples, where we see significant opportunities. Lots of times, you know, people, you know, look at Western Union and assume, you know, we got 20%, 25%, 30% market shares everywhere in the world. We're a GDP grower. How do you continue to grow this thing relative to much smaller companies? That's just not true, right? The largest single remittance market in the world is India, and we run a mid-single, upper single-digit market share. We see plenty of room to grow. That's a very digital business. It's a very pay out to account business.
We think that corridors like that are high-growth corridors for us, which will continue to propel the business at double digits. Same thing true and even more so in a market like U.S. to Guatemala. It is the second-largest U.S. outbound to Latin America market, and we have low single-digit market share in our digital business to Guatemala. I could go through this on multiple occasions. The first driver of continued strength in double-digit growth in our business is focusing on high-growth corridors where we are underweight in terms of share. We will talk more about that at our investor day, but we think that is a long-term rocket fuel for the business.
The second is to continue to be, you know, the strong brand that we are, the trusted provider of, remittance services and other products and services, to, you know, what we call the aspiring populations of the world. We enjoy a brand strength, that other people do not have, which allows us to cost-effectively acquire customers at reasonable CACs, which creates a high return on our marketing investment, which fuels the engine.
One of the things I always thought about was, I mean, you have this shift to digital across the industry, right? I guess the key question I always had, Devin, was, you know, how does that, I mean, the revenue per transaction is lower in that account-to-account business. I think you said the margin was a little bit higher. I think a key question is, I mean, what is the EBIT per transaction, right, as you think about that transition to digital? Because you're right. You don't have that commission cost, and distribution is getting more efficient because it's, you know, done electronically. How should we think about, I guess, the EBIT, you know, per transaction, between the, I guess, the physical retail business and, you know, the account-to-account business?
Yeah. I'd actually shift the conversation a little bit more. We can come back to the EBIT profile, which is very similar on a per transaction because of the mix difference changes in the costs versus the revenue. The real benefit is the nature of the profile of the cost base. In our retail business, which, you know, is great for us, it's a highly variable, transaction-based model where we pay commissions on the front end to the agent. We pay commissions on the back end to the agent. You know, that is, regardless of whether you do one transaction or you keep that customer for one year or 10 years, the economic profile of that is always exactly the same.
In the digital business, after you've invested to acquire the customer, and we believe we can do that cost-effectively because of our brand at reasonable CACs, the cost profile changes, right? Now I'm not paying commissions on the front end. In many cases, those payout-to-account costs are significantly less than the cash payout commission costs. Now I have a recurring revenue stream that has a cost structure that is fundamentally different and less variable than a three-year retail customer looks exactly like a first-time retail customer. A three-year digital customer is a much more valuable customer.
It's stickier.
Correct.
Right? And it's stickier. So presumably, the lifetime value, I guess, of that customer is also higher.
That's why I said the conversation becomes much more about lifetime value and what's the value of that digital business as it grows over time relative to a retail business that grows over time.
Right.
Totally. You're rolling out your next-gen digital platform to more countries. What are some of the key features or capabilities in this platform that are most important for driving customer acquisition and retention in these newer markets?
Yeah. The number one difference, and you can see it in the results in Australia where we've now been doing it for a couple of years, which is the highest growth digital market in the world for us, is friction reduction. Simplifying the experience both from an onboarding standpoint and from a payment acceptance standpoint makes a huge difference. The latest versions of the platform allow us to actually move one step further, which is what we consider to be progressive KYC. Your first transaction, if it's a low-dollar transaction, we acquire very little.
As you move through your life cycle and you either increase send amounts or you want to increase receivers or corridors, we can embed that experience as you evolve as a customer versus we go through a very heavy onboarding and KYC process upfront, which is the much more traditional way that we have done things versus we do that as your relationship with us develops over time. That friction reduction makes a huge difference in the experience. The second is basically life cycle management. On the new platform, we do a much better job of staying in touch with you, recognizing your patterns, and being able to react to those on an ongoing basis. The last, it allows us to be much more flexible around segment pricing, customer pricing, delivery of rewards programs, things like that.
Great. Maybe we could pivot to the retail business, Devin. I mean, in Europe, I think you mentioned the strong trends in the continent. I think retail transaction growth of 10%, first double-digit growth in some time. Really impressive. I mean, what specific elements of your European retail strategy do you think could be successfully replicated in other parts of the world? I mean, specifically in North America, which is still a big part of that retail business.
Yeah. Remember, there are three key building blocks to our success in Europe. If you remember, one of the reasons Europe is ahead, which we can then come to what it means for the Americas, in the summer of 2022, I think it was in my second earnings call or third earnings call, we had to announce the loss of two large strategic partners in Europe, which then accelerated our need to transform that retail business. At the bases, we have a distribution strategy we call the pyramid where we have high-controlled Western Union branded at the top of the pyramid, own stores, exclusive independents. We then have non-exclusive independents and then our large strategic accounts. That pyramid allows us to maintain kind of market presence, brand presence, and customer experience.
The second element is really all the investments we have made in modernizing our retail point of sale. We are now at about 80% of all locations in the world on our most current point of sale system, we call it Wu Pa's 2.1. It is cloud-based. It is very contemporary. Everything is on one screen, easy to get information for the agent. Has reduced transaction times, down now under three minutes, from where we were six, seven minutes before. Making that retail experience seamless, easy for both the FLA and the customer. The third is, you know, in Europe, we have really moved to this idea of kind of real-time market-based tactical pricing. We do price adjustments in some market up to three times a day to remain competitive in the market.
If we get a buy rate advantage on FX in the afternoon, we'll put that into the market to become competitive, and to, you know, own a corridor or a city for an afternoon where, you know, we can drive growth. All of those elements are replicable everywhere in the world. The U.S. is a little different construct because we still have so much of the business in the U.S. around our strategic partners, you know, the Krogers, the Walmarts, the Publix, the 7-Elevens of the world. That's a much bigger base, almost 50% of the base, than in Europe where that's now a much, much smaller base.
Okay. That's really helpful. You described that retail distribution strategy as that pyramid, right? You have the owned locations at the top, the branded exclusive concept agents in the middle, and then you have the independents at the bottom. How do you see that mix sort of evolving, particularly with the Eurochange acquisition?
Yeah. So the Eurochange actually is a great example of the top of the pyramid. I do not know if you have ever seen them. They are beautiful locations. They are well-branded. They are clean. They are safe. They have got great high-quality staff. They have a very small, even though they were a Western Union agent, they have a very small remittance business because their clear focus has been on currency exchange. We think the combination of their high-quality retail operations and our ability to emphasize Western Union products and services really, again, puts us at the top of that pyramid with a very high-quality experience for our customers in a controlled environment with the Western Union brand. It is the perfect example of the strategy in Europe where we are now, I do not know, 500-ish owned locations across Europe, Italy, the U.K., Switzerland, Spain, Belgium. We have kind of built this out.
The U.K. is a great example of that strategy at the top of the pyramid and how we get there quickly.
You've invested significantly in the point of sale system, upgrading that, rolling that out, moving to a cloud-based solution. I mean, beyond efficiency, you mentioned the, I mean, there's some efficiency there. I think you mentioned three minutes, in terms of the, to process a transaction versus seven before. You know, how do you see this technology investment changing the agent, I guess, and customer experience going forward?
Yeah. There are two or three things in there that just really make life a lot easier. I have talked about kind of this notion of, remember me and quick resend. Any customer comes up, gives us their phone number, immediately pulls up their most frequent sends, their most frequent receivers, two clicks, they can do a repeat send, right? Using customer-level intelligence, customer-level data to make it easy for the agent. Second thing is enabling the agent to solve problems. Our historic model was to either have the agent or the customer call, and we would help solve the problem.
Putting more of that problem-solving, being able to do refunds, being able to do name changes, being able to clear compliance holds, allowing that to happen at the point of sale through the technology at the interaction that the customer and the agent are having versus interrupting that interaction and putting a call center in the middle of it. The third is it's a lot more flexible to allow us to price at the corridor, at, you know, FX levels, directed source rates, being able to have different prices for different payout partners, particularly as you move to more payout to account. All of that is way, way easier in the new system than in the old.
Agents are happy. I guess that does that help the splits that you're giving back to the agents? I mean, presumably if they're doing more transactions.
Would you like a job as a sales guy? Because I like to tell the sales guys that. They tell me no, but yes. Ultimately, what it does is help us win at least our fair share, if hopefully not more within a competitive agent environment. I do not think it changes the economics, but it does help us change potentially what part of the agent share of business we win.
Great. Maybe just last one on retail. I mean, I think in terms of the Evolve 2025 strategy, the goal is really to improve the retail business, I think to sort of flat, you know, stable to maybe slightly growing over time. Where are we, Devin, I guess, on that journey, you know, as you think about 2025 relative to those expectations?
We've achieved that in the non-Americas. The change in the political situation in the Americas, and we started talking about this in the third quarter of last year where the elections that started happening south of the border, in places like Panama and Nicaragua and Colombia, Haiti, those began disrupting the migratory patterns across Latin America. The election in November had a significant impact on the border. Our South American and Latin American business saw a lot less inter-region transactions as fewer and fewer people were migrating north up into Mexico and eventually into the United States. When people talk about what's the effect of basically closing the border, it's not actually on the U.S. The effect of closing the border, and you can see this in different players, you know, we probably have the biggest exposure south of the border.
The less exposure you have south of the border, the less you've seen that effect. It's actually on the region where people were migrating towards the U.S., not the actual into the U.S. The border closure is really an issue for our business in Latin America. Post-November, the election here has caused, and we talked about this on the earnings call, a reasonable decline in transactions as customers become more reticent of being in public, of being in our retail locations, but has seen a reasonably measurable increase in principal per transaction. People are sending less frequently, larger amounts of money, pretty much consistently across corridors in most major markets in the U.S. Those two effects have slowed our progress in being able to move the Americas to a positive revenue and transaction trajectory.
You've mentioned that new customers represent a relatively small percentage of your U.S. business.
Right.
I think around 5% or so. Yeah. How does that inform your strategy, Devin, for navigating, I guess, potential immigration policy changes?
Right. Look, our long-term hope is comprehensive immigration reform. Every developed country in the world is dependent on inbound labor given current birth rates, in order to sustain positive GDP growth. It's a fact for all G7 countries. You even see it in places like Japan, which has probably been the most insular country in the world. They actually are welcoming people from Indonesia, Malaysia, the Philippines in order to get the labor productivity and labor growth rates going. I mean, they actually teach people Japanese so that they can come and work in Japan now. This is the long-term trend, it is undeniable if the G7 nations of the world all want to maintain GDP growth. Now, in order to get there, you got to have political will. You got to have comprehensive immigration reform. We hope for all of those things.
In the short term, most of our customers are already here, to your point. The impact of the less immigrant flow is really on the Latin American business. It is not so much on the North American business. The behavior modification in North America, the less transactions, the higher principal, that is the real impact here in North America is people are just more reticent to be out in public sending money. I do not know how long that will last, but that is what we are seeing. I am sure in a question or two, you will ask me about the current big, beautiful bill and what is in there that could have a material impact on my business. Again, we do not know what that impact will be, but it will be, again, a chilling effect on people wanting to send money home.
I'm looking at my script. That is the next question. Yeah. I think Republicans, I mean, initially, I think they proposed the 5% tax on remittances. I think there's some talk of that coming down slightly.
I think what passed the House was 3.5%.
Three and a half percent, exactly. A little bit lower than the initial five, unless the sender can prove he or she is a U.S. citizen or national. I guess to that point, if the tax is enacted, how will it impact demand for remittances? To what extent will remittance providers absorb that tax through lower prices? How are you guys thinking about the impact and how you're going to react to it if it goes through?
Yeah. Let's be pretty clear. There is no strategy of being able to absorb it. You know, it in essence is a, it is a doubling of the cost of sending remittances, right? I mean, our average take rate is somewhere between 3% and 4%. It's a 3.5% tax. So unless we were to take our average take rate to zero, it will get passed on to the consumers. We don't know. It is a high degree of uncertainty. We've never seen a large-scale tax at that level, which would in effect double the costs, in a major developed market. Coincidentally, in Brazil, last week, the Brazilian government passed an exactly same tax and in classic Brazil, Brazilian fashion, turned it on the next day.
We actually started collecting the tax at the end of last week in Brazil, but it is too early to tell what effect it is having. At least it is going to give us a small market example of what happens when you put a tax of that scale into the remittance business. This is one where, you know, we just do not know the answer.
I mean, presumably, I mean, the money when it's sent home, I mean, it's being used for things like food and shelter and, you know, necessities. Presumably you can't just turn that off. You know, there would be some demand inelasticity there. I would, I would.
I think that's right. I think it's the same effect, which is people will send less money less frequently, and the tax will take a chunk out of what they can send home. You know, we're paying attention to in there, and you highlight it, there's another complexity, which is about who the tax applies to. You know, how that gets managed and implemented is a very complex and open question. Most of us do not walk around with our citizenship documents. Having a retail agent in an independent shop trying to verify the validity of immigration status and citizenship is an exceptionally difficult thing to think about doing at large scale in any reasonable proximity of quality. The secondary corollary to that is now if you are collecting all of that information, where does it go?
Whose privacy rights are you maintaining? How are you maintaining them? Who has access to that information? You get into a sticky wicket pretty quickly on how you would do the second part of this law, which is only administer it to people who are non-U.S. citizens or not here documented legally. It is a very difficult thing to think about how it will get implemented. Brazil just said, "We're going to charge everybody. We do not care." They just said 3.5% remittance tax across the board, no exceptions, just pay the tax. That is actually easier to deal with than the way this has been written.
It's a, so potentially, I guess there's an impact on demand, but also on the operational side is what you're saying in terms of, I guess you would have to give the agents, you know, some ability to check that, to track that, to store that, you know, maybe pass that information along. So any way to think about, I guess, the operational aspect or the investment behind that?
I would say it is complex. And if we are required to figure it out, we will. As you know, there was a Southwest border targeting order that was put in place for 30 ZIP codes along the border. It has been held in abeyance, at least in California, but it is live in Texas, which required us to take the FinCEN regulations that normally begin at $10,000 down to $200, in terms of source of funds, address, a bunch of other requirements that if you walked into your Bank of America branch with $10,000, they would have to follow. They moved it down to $200 in these 30 ZIP codes. We successfully implemented that across almost all of our distribution, and we are abiding by the law on that consideration in those ZIP codes where it is still in effect.
We believe we operationally could do the same thing here, but it's super complicated and again, has secondary effects about, you know, document protection, consumer privacy, things like that.
Maybe just last one on migration patterns. I mean, you mentioned the migration patterns across LATAM, you know, have been slowing, affecting the business results. I mean, what longer-term trends do you see in global migration patterns? We talked about, you know, people learning Japanese. I think populations in certain developed countries are actually in decline, if you exclude migrants. So, you know, how do you think about that long-term and how Western Union is positioning itself?
Look, there are two effects that we think are very important. One is, which we've already talked about and you highlight, every developed nation in the world has seen a slowing of their birth rates. In order to maintain strong GDP growth, you know, GDP is basically quantity of labor times productivity. Productivity has been declining. You have to increase the quantity of labor if you want GDP growth. That can only happen through inbound migration in most big countries around the world. The other benefit is people who move from lower productivity countries to higher productivity countries. It's not because the labor's less productive. It's generally the construct and the economic model in the countries that they're moving from to the countries they're moving to.
The global net benefit of that migration on global GDP is actually you take people who are in a relatively low context and productivity environment and you put those same people in a higher context productivity environment. It is beneficial globally for everybody involved. We think it is a force for a business like ours that is long-term and, you know, unstoppable, right? Now it has lots of other issues, ebbs and flows and political considerations, but it is a strong underlying force. The second, which is to our Evolve 2025 strategy, one of the most important demographic consumer cohorts in the United States today is the Latino community, right? There are 30 million Mexicans living in the United States, right?
Many of those have had experiences with Western Union, we're a trusted financial services provider, and this is true everywhere in the world. The embedded base of our past, current, and future customers is an asset that we have that we continue to use to build out our business, grow across a range of products and services. Because we are recognized by these communities, we have been part of their journey in establishing themselves in a new country, and we have credibility. We believe that is a long-term, positive trend for us as well.
We have about 10 minutes left here. I wanted to pivot maybe to, you know, technology innovation. You know, you've expressed interest in leveraging crypto for settlement to potentially reduce the float. I think Matt has talked about, you know, a billion dollars of, of sort of, you know, working capital in the business to manage the business. And so I guess what are specific regulatory or tech hurdles that need to be overcome before this becomes a significant part of the operations?
Yeah. Look, some clarity on a regulatory framework, particularly for a company like ours, is always helpful. We'd like more clarity around, you know, how the regulators will treat it. Is it an asset class? Is it a transaction? Is it a regulated security, right? We'd like that. That would be good for us. In the absence of that, we continue to experiment and look for ways. Right now we have pilots going on in two countries in the world where, you know, we are settling and moving money through stablecoins. What I would say is in countries that have high either operational logistics or regulatory barriers to the free movement of currency, it's helpful, but it's cumbersome and expensive.
For places that have less of that, it's not yet clear what the value proposition is because it's complex and expensive to take from fiat currency, move into a stablecoin, move the stablecoin across geographies, translate the stablecoin back into local currency. The transaction costs and the logistics of getting high-quality exchanges on both ends to do that, enough volume to be able to do it in and out of the local currency, is again, operationally challenging and expensive.
What, I guess, what brings that cost down, right? I guess is it just.
Scale.
You need more liquidity, I guess, in that market. If you get the volume up, then the, I guess, the spread and the ability to convert into local comes down.
It's not so much the volume for us. It's the volume in that market for that coin, right? The more non-remittance use cases that people are, you know, so in order for you to offload a stablecoin, someone in the local market has wanted to invest in that stablecoin so that then frees up the ability to get local currency, right? If there's high market demand for that stablecoin, that creates more liquidity, which makes the on-ramp and off-ramp easier. The more non-remittance examples of why people are investing in that stablecoin in that country increases liquidity and makes it easier for us to unload and offload.
Would the, I mean, because I think there's talk of stablecoins potentially disrupting cross-border providers. I mean, I guess, are you guys thinking about this as, "Hey, we're actually going to use stablecoins to lower our cost." We still, like this, end customer still needs to be acquired. We're going to own that relationship. We're just going to use this as another rail to operate more efficiently. That might affect market pricing across the industry because presumably other providers might pass along that lower cost to consumers. Is that sort of the right way to think about it where you would still own the end customer in terms of that relationship?
Look, I've said this many, many times. We're not actually in the business of moving money. Today we use a highly inefficient legacy system called SWIFT. Anything that could make that easier, faster, or cheaper is better for my business. If somebody figured out how to move money with Turbo Pigeons, I'm happy with Turbo Pigeons, right? Like, my alternative is the SWIFT banking system. My business is acquiring customers, which we talked about, cost-effectively at reasonable CACs in both the retail, ensuring regulatory compliance that we know who those people are, we know who they're sending to, we know why they're sending, and we know what the source of their funds are. That's my business.
How it then moves from that person to the person who's receiving it on the other end, I'm moderately indifferent, and I'm continuing to seek the most efficient, as Matt has said, least capital-intensive way to do that. If stablecoins can do it, awesome. Right now we haven't found that. It's more complex and more expensive, but it does solve some market inefficiencies for us in a few places of the world where there is no good alternative. Wherever there's a good alternative, it's not yet met the threshold for efficiency and cost-effectiveness. When it does, we're happy to every day long do it that way.
Kind of reminds me of, I guess, account-to-account, right, where the distribution is getting more efficient, the cost comes down, presumably you have a slightly lower rep per transaction, but it's very good margin business for you guys.
Again, this, so long ago, long, long time ago, societies around the world decided an anon—being able to move money anonymously from one country to another results in really bad shit, right? Human trafficking, terrorism, weapon trafficking, child exploitation. I can go down the list of really bad shit that happens. There is a framework everywhere in the world that regardless, again, this idea that somehow, you know, digital currency is going to absolve you from all of that and therefore it is going to be the super low-cost, easy way in which to move money from one country to another is not going to happen, right? The world has decided they do not like all those really bad things.
The way you prevent all those really bad things is you actually know who's sending money to who and why, and you have some controls around it. That's the business I'm in.
No, it makes a lot of sense. I wanted to weave in one question. I guess that's kind of related to this, from the audience. It says, "You've been paying out your strong cash flow in the form of dividends and buying back stock, but the stock has been down. Why not take that cash flow and replicate the MicroStrategy playbook and buy Bitcoin?
Have you ever met my CFO?
Matt.
I know Matt. Yeah.
Yeah. Exactly.
I think Matt would probably not really support that idea. It would add a certain amount of volatility to our balance sheet that our regulators probably would not like. I mean, MicroStrategy is not a regulated financial institution in over 100 countries around the world who maintains an investment-grade credit rating. And our core business is dependent on those things. In order to do exactly what we talk about, which is move money seamlessly around the world, probably a large quantity of Bitcoin in the balance sheet is not going to sit well with my regulators.
I guess maybe a broader question though, I guess, you know, have you thought about maybe taking down margins or like reinvesting, maybe changing up the playbook a little bit more? I mean, I know you have the Evolve strategy. It's been working. You're moving in the right direction. You know, have you thought about maybe being more aggressive, I guess, in trying to mix it up?
The good news is over the last three years, a lot of our incremental free cash flow has been to support the Evolve strategy. You know, becoming market competitive, you know, has required us to, you know, significantly reduce prices. We've had to re-lever the balance sheet, having exited Russia and sold our Business Solutions business. As you know, we've had this deferred tax liability that's been hundreds and hundreds of millions of dollars that we cleared on April the 15th. We expect to have a reasonably increased level of discretionary free cash flow in this next planning horizon than we've had in the last three years. I think that opens up opportunities either for accelerated investment, accelerated stock repurchase, accelerated M&A. Many of the constraints over the last couple of years, we've now worked our way through.
Great. We have about a minute left, Devin. We have generalist specialists in the room. We have people listening in. I mean, what's the pitch on Western Union and why should people buy into the stock today?
Hey, we got a 10% dividend yield, right? So can't replicate that. Strong free cash flows, an investment-grade balance sheet, a change in the underlying health and trajectory of the business. The first time I sat on this stage, we were shrinking 6%. You know, as you noted, we are, in the fourth quarter of last year, we actually grew. In the first quarter, we were only down 2% ex-IRAC. And so this business has largely stabilized. And so we think an ideal opportunity to think about Western Union as an investment.
No, absolutely. We'll have to leave it there, Devin. Thanks so much for doing this, and look forward to following your progress.
Thank you so much.
Thanks, everyone, for listening.