Western Union snaps up 15% stake in Saudi telco’s payments arm
Western Union has spent $200 million on a 15% stake in digital wallet stc pay, the payments arm of Saudi’s largest telecom company STC.
The US remittance firm’s minority stake values stc pay at 5 billion riyals ($1.3 billion). The fintech facilitates local bank transfers, merchant payments and international remittances.
STC Group’s chairman, Mohammed bin Khalid Abdullah Al Faisal, claims the deal creates the first “Saudi unicorn”, and the first fintech unicorn in the Middle East.
But according to CB Insights, the Middle East is already home to at least eight unicorns. One of which is in the Arab world, the UAE’s Emerging Markets Property Group (EMPG). The other seven are based in Israel.
Stc pay currently claims some 4.5 million users, representing roughly 13% of Saudi Arabia’s population.
It says the $200 million US investment will finance its capital and underpin the start-up’s long-term expansion plans.
Nasser Alnasser, STC Group’s CEO, calls stc pay “a fintech national champion”. It’s business model fits in nicely with the Saudi government’s efforts to reduce cash dependency and modernise the economy.
Relationship to date
Both companies also “extended the terms of their commercial relationship”, according to a press statement.
Currently Western Union provides stc pay with money transfer services. The partnership allows users to send money from stc pay to more than 200 countries in over 130 currencies.
Western Union deems stc pay a recognisable brand across the Middle Eastern region. This leads it to believe the payments arm is “poised to experience strong growth”.
The US remittance giant intends to capitalise off this growth, in line with its 45% year-over-year digital revenue increase in Q3 2020.
Some 21% of customers now use Western Union digitally rather than over the counter. This has prompted the incumbent to invest further in its digital shopfront.
stc pay represents Western Union’s ticket “into new digital payment services in the Gulf region”, its global network president Jean Claude Farah says in a statement.
The minority stake deal will close in the first quarter of 2021, subject to regulatory approvals.