MGI

Moneygram International, Inc. (MGI)

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MoneyGram International, Inc. (MGI)

Barclays Emerging Payments Forum Call

March 19, 2013 11:20 ET

Executives

Peter Ohser - SVP, U.S. and Canada

Eric Dutcher - VP, IR

Analysts

Unidentified Analyst

Presentation

Unidentified Analyst

I think what we can do is get started right now. We will start off with the ARS question as the management team makes their way on the stage. But the question is, number one, what percentage of US population do you believe is under banks? Number one, approximately 10%; two, 20%; three, 30%; or 40% at number four?

Monica? 20%. Well we will find out if you guys agree with that at the moment, but why don't we first of all start off, thank you again for being here. We have the team for MoneyGram with us. Would it be -- I think it would be helpful maybe just start off introducing yourselves, and tell us a little bit about your backgrounds, and then we will get into some questions on MoneyGram and the under bank market.

Peter Ohser

Absolutely. My name is Peter Ohser, I am the Senior Vice President for the US and Canada, I am responsible for all the money transfer, bill payments, and our financial -- our paper products in the US and Canada for MoneyGram. Been with MoneyGram 12 years in a variety of different capacities.

Eric Dutcher

My name is Eric Dutcher, I am the Vice President of Investor Relations and I also work on strategy and M&A. I have been with MoneyGram for a year and a half and came formerly from private equity and Affiliated Computer Services.

Unidentified Analyst

Great. Well thanks again. I think what would be helpful, maybe we will start off with discussion and questions about the under bank market, which is really where this panel was meant to be. We will go into some specific questions on MoneyGram towards the latter part of the discussion, then open it up for questions. But starting off, I think just helping share your views on, really the size of the market. I know, we had a question on that, the audience thinks 20% or so, but how big is this market, what is the growth profile of the market in a sense of under bank and really, what trend do you expect, if any, over the next two to three years?

Peter Ohser

The size of the under bank market is, it's hard to measure and how you define kind of what is underbanked and we struggle frankly with the term a little bit, because there is lot of folks who have had bank accounts, they are in and out of bank accounts. But generally, it's 15% to 20% of the population we know that are in that, what you classified as the under banks. It is growing, as consumers are shifting into kind of non -- what kind of call, alternative financial services, right. So they are going to Walmart and they are cashing their check and they are doing transactional base types of activities.

They are being pushed out from the banks from high fees, and they just don't like there is a trust factor, that a lot of the consumers don't like. For most of these consumers, really, they are transactional. If you think about these consumers, they typically don't have large savings, they are living paycheck-to-paycheck and they use transactional services because it works for them, and if you offer them a bank account, even if it was very subsidized in a way, it may not still work for them. They really like that transactional based services.

Unidentified Analyst

Okay, when you think about serving that market, what are the different products that you could think of that, either MoneyGram or the market in general could offer, to help service that population?

Peter Ohser

Well, interestingly MoneyGram is obviously a money transfer company, predominantly, but 70% of money transfer customers are actually banked, and -- but the services are not readily available in banks at a competitive -- that have a competitive rate. So we find the bank consumers coming into these non-bank financial institutions to do these types of transactions.

Prepaid obviously is a huge story around how to service these customers, to give them additional tools to do transactions. But as you have seen with prepaid, I know Green Dot was in here, is that there is a tremendous amount of churn in these card portfolios. There is only maybe a 20% to 30% of these customers that are actually putting direct deposit on to these, because they really view these as disposable type transactional services. I want to get online, I have onetime use or a couple time use, and I use it, and then that's disposable, and at $4 or $5, it might be worth it too.

Unidentified Analyst

And when you think about the regulatory issues underlying in the market, just moving on there for a moment. Specifically in money transfer first, then we will talk about some of the prepaid side if you will. What are the actual latest regulatory things that we should all be aware of, with regards to money transfer? There is always different headlines that pop-up?

Peter Ohser

Well, Dodd Frank is the biggest regulatory environment coming under the CFPB and we don't know when that will come into effect, it was supposed to go in, in February of this year, and it has been pushed out and -- but they haven't actually announced when it will come out, but it's expected to come out somewhere in the second half of 2013. And that really is about disclosure, and for a company like MoneyGram, it's not a huge issue for us. We have already been very transparent in the disclosure components, but it does create a different consumer experience, needing to provide a lot of additional legalities and other information into consumers. But overall the regulatory environment, we don't -- we see it as pretty friendly.

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